Three South Korean banks earned $31.2 million from their partner cryptocurrency exchange transactions in 2021. New data showed that partnerships with trading platforms could pay off for the often cautious local banking sector.
South Korean law requires crypto exchanges that offer KRW trading pairs with fiat money to partner with banks, which must give the platforms the ability to turn fiat on and off. They must also absorb potential money laundering risks, as any violation in this regard is considered a black mark for the bank.
Nevertheless, a huge surge in crypto trading early last year led to a surge in trading volumes on most major platforms. Since crypto clients are required by law to have bank accounts with a verified real name at an exchange partner bank, this also led to an increase in customer account openings for all three banks.
The success was almost overwhelming for the market leader Upbit and its partner bank, neobank K-Bank . Operator Upbits Dunamu was officially classified as a conglomerate-sized company by the markets regulator, becoming the first cryptocurrency firm in the country to be classified as such. Conglomerates in South Korea are subject to a number of restrictive rules.
For K-Bank, the partnership with Upbit brought in $22.76 million last year, according to data collected by the regulatory Financial Oversight Service by deputy Yoon Chan-hyun, a member of the Political Affairs Committee of the National Assembly and published by MBC.
This figure represents a 30-fold increase from 2020, when K-Bank earned just over $750,000 on its Upbit-related business.
The surge caused serious problems for the bank in the midst of South Korea’s latest cryptocurrency rush, when the bank went out of business due to an emergency in managing K-Banks’ loan-to-deposit ratio last April. This, in turn, forced Upbit to temporarily freeze withdrawals and deposits while waiting for K-Bank to fix the problem.
The revenue comes almost entirely from fiat deposit and withdrawal fees that banks charge every time an exchange customer makes a fiat transaction.
Meanwhile, the Bithumb transaction. с NH Bank brought the latter about $6 million in 2021, while the same bank also earned more than $2 million from its partnership with Coinone . Shinhan Bank which now partially owns the exchange Korbit , has earned $660,000 in crypto-platform partnerships in 2021.
As reported, rival K-Bank, Kakao Bank. is allegedly in talks with Coinone about a deal that could see the latter abandon its current NH partner in favor of a new deal with a subsidiary Kakao Group .
A recent deal between a new regional bank Jeonbuk Bank. and a small Gopax crypto-exchange has also opened the door for a number of smaller banking players to join the battle, hoping that in this way they can generate new revenue streams and increase their revenues. customer base.
Members of new President Yoon Suk-Yeol’s political team have previously said they expect to get regulatory approval for two or three more cryptocurrency exchanges by the end of this year, which means more banks will be needed to partner with the platforms.
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