Banks push ahead with crypto exchange partnerships despite reputational risks

The prices of cryptocurrencies are displayed on a screen inside the lounge of Bithumb, Korea's second-largest cryptocurrency exchange, in southern Seoul, March 4. Yonhap

Korean banks are doubling down on partnerships with cryptocurrency exchanges despite lingering reputational risks from exchange-related incidents, as tighter household debt controls and lending curbs squeeze loan growth and push lenders to seek new profit streams, industry officials said Friday.

A number of commercial and internet banks are already tied to major platforms: K Bank with Upbit, KB Kookmin Bank with Bithumb, KakaoBank with Coinone, Shinhan Bank with Korbit and Jeonbuk Bank with GOPAX.

These alliances persist despite concerns over potential fallout from exchange mishaps. Even after an unprecedented incident at Bithumb last month — where 620,000 bitcoins, worth about 60.76 trillion won ($40.3 billion) at the time, were mistakenly credited to users — KB Kookmin Bank opted to maintain its partnership with the country’s second-largest cryptocurrency exchange, renewing the contract for another six months.

While primary liability for such incidents lies with the exchanges, regulators could still scrutinize partner banks’ internal controls and their handling of customer protection if needed.

The Financial Supervisory Service has recently called on the National Assembly to expand its authority, seeking powers to oversee and sanction crypto exchanges at a level similar to traditional financial institutions.

For banks, however, the upside is hard to ignore. These partnerships generate fee income while also bringing in a stable source of low-cost funding.

Under Korea’s system, exchanges must work with banks to offer real-name verified accounts for deposits and withdrawals.

This funnels crypto investors into the banking system, as users open new accounts or shift existing ones to access trading. Banks earn fees on fiat inflows and outflows tied to crypto transactions. Funds held in exchange-linked accounts also boost their demand deposit base, thus providing a steady, low-cost funding stream.

The impact has been visible. KB Kookmin Bank’s demand deposits, for example, rose by 3.2 trillion won in just three months after launching its partnership with Bithumb in March 2025, with more than 1.5 million accounts linked to the exchange. Bithumb ended its earlier partnership with NH NongHyup Bank.

“Cryptocurrencies have already established themselves as part of a broader global financial landscape, and there is a growing recognition across the financial sector that they represent an irreversible trend, despite bouts of volatility or market disruptions,” a banking official said. “Against this backdrop, banks are more likely to maintain and gradually expand their partnerships with exchanges, while prioritizing risk management and user protection at the forefront, rather than pull back entirely,” the official also said.

As the regulatory framework surrounding digital assets continues to evolve, banks also see strategic value in “building infrastructure and experience in this sector as a way to strengthen their long-term competitiveness,” the official added.

Industry watchers say competition could intensify further if regulators ease the long-standing rule limiting each crypto exchange to a single banking partner. The arrangement has been maintained in part to prevent money laundering, as transactions across multiple banks would be harder to trace in the fast-moving crypto market.

If that constraint is lifted, as witnessed in the European Union and parts of Asia, banks are expected to move more aggressively to secure multiple partnerships, setting the stage for deeper expansion into the crypto ecosystem.

“Banks are likely to compete to secure partnerships with major exchanges, weighing factors such as user scale, anti-money laundering capabilities and the level of technical integration,” the official said. “At the same time, exchanges would gain greater bargaining power, making such alliances more fluid and competitive.”