Short Description
South Korea is reexamining its “one exchange–one bank” model for cryptocurrencies, aiming to boost competition in the crypto market while developing new regulatory frameworks.
Read Time
Approximately 4 minutes
Main Article
South Korea has initiated a comprehensive review of its cryptocurrency market structure, particularly scrutinizing the prevalent “one exchange–one bank” practice that ties digital asset platforms to individual banking institutions. This examination is spearheaded by the Financial Services Commission (FSC) and the Fair Trade Commission (FTC), reflecting a growing concern over market concentration and limited competition among cryptocurrency exchanges. Local media reports indicate that this initiative follows a government-sponsored study assessing the competitive landscape of crypto trading in the country.
The “one exchange–one bank” model has emerged informally due to strict Anti-Money Laundering (AML) regulations and customer due diligence requirements. Though not explicitly enshrined in law, it has resulted in crypto exchanges forming exclusive partnerships with local banks to facilitate fiat transactions. This model has raised significant concerns, particularly for smaller or newer exchanges that struggle to gain access to essential banking services, thus reinforcing the dominance of established players. Economists and regulators alike worry that this structure could hinder innovation and restrict new entrants in the rapidly evolving digital asset ecosystem.
Recent research conducted by the South Korean government highlighted that the current banking arrangement limits liquidity and transaction efficiency, favoring larger, more established platforms. By applying uniform compliance standards to exchanges of varying risk profiles and sizes, the system may disproportionately impact newcomers, potentially entrenching monopolistic behaviors within the market. This report serves as a catalyst for discussions around necessary regulatory reforms aimed at fostering a more competitive landscape for cryptocurrencies.
Meanwhile, South Korean regulators are preparing for the next phase of crypto legislation under the proposed Digital Asset Basic Act. This regulatory framework aims to establish clearer guidelines for stablecoin issuance, ensuring that all reserve assets are managed by authorized custodians like banks. However, debates continue over how best to implement these regulations without stifling innovation from non-financial companies. With upcoming decisions expected to shape the future structure of the crypto market, this evolution in regulation may create a more balanced environment for all participants.
Short Summary
South Korea is reevaluating its cryptocurrency market by scrutinizing the “one exchange–one bank” model to enhance competition and foster innovation. As new regulations evolve, stakeholders are closely watching future developments under the Digital Asset Basic Act, which aims to balance oversight with the needs of emerging players.
