Banks eye deposit gains as multi-bank model for crypto exchanges resurfaces
Prices of cryptocurrencies such as Bitcoin are displayed on an electronic board at Upbit’s customer service center in Seoul’s Gangnam District, Jan. 14. Yonhap
Banks are pinning their hopes on regulatory easing as discussions resurface over loosening rules that limit cryptocurrency exchanges to partnering with only one bank for deposit and withdrawal accounts, industry officials said Tuesday.
Banks tied to smaller cryptocurrency exchanges are particularly hopeful, as allowing multiple banking partners per exchange could help boost demand deposit balances and attract new customers.
The existing framework has drawn criticism for applying a uniform regulation that overlooks differences in scale and business models among exchanges, ultimately intensifying market concentration.
The won-based cryptocurrency market is effectively dominated by two players, Upbit and Bithumb. Last year, Upbit accounted for 68.87 percent of the market, while Bithumb held 28.26 percent, giving the two a combined share of 96.93 percent. As a result, deposit funds have also become heavily concentrated in the banks partnered with these dominant platforms, while smaller exchanges share only a marginal portion of the market.
Since Korea introduced a real-name system for cryptocurrency trading in 2018, users have been required to trade through bank-issued accounts verified under their own names, prompting exchanges to form partnerships with banks. Under the current framework, each exchange is allowed to work with only a single bank, a restriction designed to improve transparency in financial transactions and curb money laundering risks.
Upbit works with Kbank, Bithumb with KB Kookmin Bank, Coinone with KakaoBank, Korbit with Shinhan Bank and Gopax with Jeonbuk Bank.
Although the Act on Reporting and Using Specified Financial Transaction Information took effect in 2021 and the Act on Protection of Virtual Asset Users in 2024, the basic structure of this single-bank policy for crypto exchanges has remained intact.
Debate over shifting to a multi-bank system briefly gained traction last year after Woori Bank CEO Jeong Jin-wan raised the issue, but the momentum quickly faded.
Market imbalances, meanwhile, have deepened. As of the end of the third quarter last year, deposits at Upbit stood at 7.49 trillion won ($5.2 billion), while Bithumb held 2.98 trillion won. By contrast, the combined deposits of the third- to fifth-largest exchanges are estimated at about 1 trillion won, a level industry officials say is barely enough to generate a meaningful inflow of deposits.
“Banks partnered with smaller exchanges, as well as those without any exchange ties, believe that a more flexible system could spread deposits more evenly,” a banking industry official said. “Easing the one-exchange-one-bank practice would broaden consumer choice and potentially redirect some of the deposits concentrated at certain exchanges to other banks.”
Regulators, however, remain cautious. The Financial Services Commission (FSC) said easing the regulation could heighten market dominance and create potential weaknesses in anti-money laundering safeguards.
“We plan to review the issue by taking all related concerns into account, but at this stage, no specific changes have been decided,” an FSC official said.
Globally, many Asian and European countries already operate under multi-bank partnership models for cryptocurrency exchanges.
“Strengthened legal frameworks following the introduction of the Act on Reporting and Using Specified Financial Transaction Information and the Act on Protection of Virtual Asset Users have reduced the practical value of the single-bank policy,” an official at the Korea Institute of Finance said. “Still, any regulatory relaxation should be accompanied by robust measures to address money laundering risks.”