Major banks in South Korea have called for regulatory changes that would allow them to collaborate with crypto companies. Banking executives made the call in a meeting held at the Korea Federation of Banks office, where they hosted lawmakers from the ruling People Power Party’s Political Affairs Committee.
According to a report of the meeting by Money Today, the heads of South Korea’s biggest commercial banks, KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, were united in calling for regulations that will expand partnerships between crypto exchanges and banks. Executives from neo-bank Toss Bank and regional bank Jeonbuk Bank supported the opinion.
The banks’ concern with crypto regulations mostly revolves around the country’s system of one bank, one exchange. Under these rules, crypto exchanges can partner with only one bank in the country so that anti-money laundering protections can be implemented effectively.
Due to that policy, crypto exchange users must link their real-name bank accounts to crypto trading platforms to access deposits and withdrawals.
However, the banks believe this policy is causing more harm than good. Woori Bank President Jeong Jin-wan believes the current system has stability risks and limits options for customers who might want to use other banks. Thus, they want lawmakers to expand the banking partnership.
He said:
“This system poses risks to the stability of the system. Since there are also restrictions on consumer choice and corporate customers, I ask that it be expanded to one exchange-multiple banks.”
Beyond discussing crypto, the banking executives also highlighted other issues that they found concerning. Shinhan Bank President Jeong Sang-hyeok wants the government to lower the risk weighting of industrial loans, while Hana Bank CEO Lee Ho-sung wants an expansion to the Youth Employment Linked Fund.
South Korean banks want to get involved in crypto
Meanwhile, the recent calls for expansion of crypto-banking partnerships only continue the trend of commercial banks in South Korea seeking to embrace the crypto industry. The strong interest in crypto is because of the growth opportunity it offers these commercial banks.
Although the bank executives did not mention it, one major issue with the one bank, one exchange system is that it has enabled unfair competition and favored some banks more than others. According to Maekyung Economy, digital bank K-bank has been the biggest beneficiary of this policy.
The neo-bank’s user base has grown from 2.19 million in 2020 to 12.7 million as of the end of 2024 due to its partnership with South Korea’s biggest exchange, Upbit. This accounts for more than half of the South Koreans that have crypto exposure.
According to available data, around 16 million South Koreans, over 30% of the country’s population, have crypto investments. 20% of high-ranking government officials also hold cryptocurrencies.
Interestingly, the crypto ecosystem in South Korea could witness more growth in the coming months, especially as the country readies institutional investment in crypto. South Korea Financial Services Commission plans to release guidelines for institutional crypto investment by Q3 of 2025.
Many believe regulatory clarity will open up the industry, and local crypto exchanges are already preparing for that moment. It is unsurprising that commercial banks also want a piece of the pie.
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