Leading banks in South Korea are advocating for a revision of the nation’s cryptocurrency regulations, with the goal of enhancing their ability to collaborate with various crypto exchanges.
This initiative, highlighted during an April 9 meeting held by the Korea Federation of Banks in conjunction with legislators from the ruling People Power Party, has drawn attention from local news sources.
During the meeting, executives from five major banks, including Woori Bank’s CEO Jeong Jin-wan, expressed their significant concerns regarding the current one-to-one banking framework that mandates each exchange to partner with only one bank.
Jeong emphasized that this configuration limits consumer choice and places an unnecessary burden on the financial system. He also indicated that the existing model restricts consumer flexibility and stifles competition within the banking landscape.
As a solution, the banking leader suggested that allowing multiple banks to collaborate with a single exchange would foster a more robust and customer-friendly atmosphere for both retail and institutional clients.
South Korea implemented the one-to-one rule in 2018 to uphold anti-money laundering regulations in the crypto sphere, requiring exchanges to partner with only one banking institution and enforcing real-name verification with that bank.
However, many critics now assert that this guideline has become obsolete.
In light of this, the bankers contended that the policy hampers user access and stifles innovation in the financial sector. They argued that the rigid structure compels exchanges to depend heavily on a single banking partner, escalating operational risks and limiting service options for consumers.
The request for a policy review emerges against the backdrop of rising concerns regarding the systemic risks associated with exclusive exchange-bank ties.
A South Korean lawmaker recently highlighted potential risks related to Upbit, the nation’s largest crypto exchange, noting that 20% of K Bank’s deposits—its exclusive banking partner—stem from the exchange. Such a scenario suggests that disruptions at Upbit could potentially lead to a liquidity crisis for the bank.
If the government chooses to amend this policy, exchanges would be able to select from a wider array of financial partners, potentially enhancing services, improving risk management, and creating more investment avenues for both retail and institutional participants.