Crypto

South Korean Banks Embrace Crypto Custody

South Korea Cryptocurrency

On the back of new legislation that limits local entities’ access to digital assets, a number of South Korean banks have opted to go the route of offering crypto custody services as a viable solution to the prevailing situation.

Regulations of Cryptocurrencies in South Korea

Many cryptocurrency enthusiasts spoke of the days that digital assets would go mainstream, with regulations being the common subject of many of those discussions. Well, after all the waiting and debating, crypto’s time to shine has finally arrived – with regulations in tow.

In the South Korean context, legislators have come to the conclusion that all entities that provide digital assets management services, including cryptocurrency exchange and providers of other related services, must register to gain the approval of the country monetary watchdog, KFUI (Korean Financial Intelligence Unit), in order to operate legally within South Korean borders.

This process requires all entities that wish to or already operate in the digital assets arena to register with the ISMS (Information Security Management System). The aim is to ensure that all accounts have real names attached to them and that cryptocurrency transactions are not used to circumvent the system’s safeguards against financial crimes like money laundering.

Korean banks adapt to suit the changing environment

Following the regulator’s announcement, a number of big banks in South Korea went in search of alternatives that would help them continue to provide their customers with access to digital assets-related services like exchanges.

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The solution is forming partnerships with fintech companies in order to provide crypto custody services to their clients. More specifically, four banks in South Korea have gone the route. They are Kookmin Bank, NH Nonghyup Bank, and Shinhan Financial Group, and Woori Financial Group.

Kookmin Bank chose to team up with blockchain developer Haechi labs in bringing to life their DACS (Digital Assets Custody Service) named KODA, which currently offers support for Bitcoin, Ethereum, and KLAY tokens.

Shinhan Bank, on the other hand, opted to strategically invest in the already established KDAC (Korean Digital Assets Custody), which was developed by cry exchange Korbit. Meanwhile, Woori Financial Group joined forces with Coinplug, among the first cryptocurrency exchanges in South Korea and majority shareholder of the joint venture, to bring their clients a DAC service named D-Custody.

Lastly, we have NH Bank who struck an agreement with the second-largest digital assets exchange in South Korea, Bithumb, to provide their customers with accounts that allow them to directly trade top tier cryptocurrencies like Bitcoin and Ethereum with the Korean won.

Only a matter of time

Through their willingness to adapt to change, S. Korean legacy financial institutions have helped to keep the doors open for innovation, even in the face of what some might refer to as a government crackdown, particularly after the mention of a 20% capital gains tax that is set to go into effect next year.

However, the coming of regulation had been foretold, especially in the wake of both astronomical value gains and the staggering losses to cyber and financial crimes. It really was only a matter of time.

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Joel Bonga

A part time cryptocurrency trader, mostly a hodler, and Blockchain/crypto freelance writer. Plus an occasional contributor at BIZZNERD.
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