Banks to expand crypto business as corporate funds set to flow

By Lee Yeon-woo

The banking industry is looking to expand its cryptocurrency businesses as the government's recent decision to gradually allow corporations to invest in virtual assets has fueled expectations for new revenue streams and customer expansion, industry officials said Friday.

The virtual asset committee under the Financial Services Commission (FSC) decided Thursday to allow nonprofit entities, such as universities and social welfare organizations, to open accounts for virtual assets and trade them starting in the second quarter. In the second half of this year, trading accounts will also become available to selected listed companies.

The Korbit Research Center projects that the influx of corporate funds into the virtual asset market could generate 46 trillion won ($31.8 billion) in value by 2030.

In the past, the banking industry tended to take a cautious stance on virtual assets. However, as the industry integrates into the institutional framework and new investors emerge, banks have started pursuing these new business opportunities.

Under current regulations, virtual asset exchanges require customers to have real-name bank accounts. Currently, five banks have established partnerships with Korea's five major exchanges. This includes Kbank with Upbit, KakaoBank with Coinone, Shinhan Bank with Korbit and Jeonbuk Bank with GOPAX. On March 24, the partnership between KB Kookmin Bank and Bithumb will go into effect.

"Banks have been actively seeking to create value beyond traditional banking services," a banking industry official said. "The integration of virtual assets into the regulatory framework indicates that risks surrounding the industry have been somewhat mitigated."

The expansion of the virtual asset business is also driving significant profits.

As of the first half of 2024, Kbank, which partnered with Upbit, noted that 17 percent of total deposits were related to Upbit. Fees from investors' deposits and withdrawals also made up 40 percent of Kbank's total fee revenue.

In January, KB Kookmin Bank signed a partnership with Bithumb, which had previously partnered with NongHyup. Following the announcement, account registrations at KB nearly quadrupled, KB said.

Meanwhile, Shinhan Bank extended its partnership with Korbit for another year in December, reinforcing its commitment.

Others are exploring alternative entry points into the crypto industry.

Hana Bank, for example, has yet to partner with an exchange but said it is actively seeking collaboration opportunities with various market participants. In September, it acquired a 25 percent stake in BitGo Korea, a global virtual asset custody service provider, signaling its interest in digital asset management.

Similarly, Woori Bank has not yet partnered with an exchange but is making moves in the industry. In January, it announced a partnership with BDACS, a domestic virtual asset custody service provider.

The banks, which secured partnerships with domestic exchanges, primarily anticipate a significant influx of deposits once corporate investments start to kick in. As of January, the amount of deposits made by retail investors in Korea's five exchanges already stood at 10.7 trillion won. Revenue generated from money transfers is expected to rise as well.

At the same time, expectations are rising that the market landscape of virtual asset exchanges will shift, accompanied by a growing role for banks.

Upbit, which holds an 80 percent market share, has partnered with Kbank, an internet-only bank with a relatively weak presence in corporate banking. Coinone is in a similar position, as it is partnered with KakaoBank, another internet-only bank. In contrast, exchanges such as Bithumb and Korbit that are partnered with commercial banks may gain a competitive advantage.

"Allowing corporations (to open accounts for crypto investments) is expected to have some impact in addressing the monopolization," Kim So-young, vice chairman of the FSC, said at a briefing, Thursday.

However, before taking full effect, challenges remain, including the need to strengthen anti-money laundering systems, industry experts said. Due to the high level of anonymity in virtual assets, corporate account transactions require more rigorous owner verification.

The virtual asset industry has expressed intent to boost cooperation with financial authorities to mitigate these concerns.

"We will continue to work closely with the FSC and other relevant authorities, collaborating with industry participants to strengthen anti-money laundering measures, while also enhancing user protection," said an official from the Digital Asset eXchange Alliance, the consultative group of Korea's five exchanges.