Quick Breakdown
- South Korean regulators are reviewing exclusive bank-exchange partnerships over competition concerns.
- A government study warns the model may entrench dominant crypto exchanges.
- The review coincides with delayed legislation on stablecoins under the Digital Asset Basic Act.
South Korea’s financial authorities are reassessing a long-standing practice that effectively links each cryptocurrency exchange to a single banking partner, amid growing concerns that the model may be limiting competition in the country’s digital asset market.
According to local media reports, the Financial Services Commission (FSC) is working alongside the Fair Trade Commission to evaluate whether the arrangement contributes to market concentration and disadvantages smaller or newer exchanges.
While the “one exchange–one bank” structure is not written into law, it became standard practice as banks sought to comply with strict anti-money laundering (AML) and customer verification requirements. This has resulted in crypto platforms relying on exclusive relationships with domestic banks to offer won-denominated deposits and withdrawals.
Study flags risk of market concentration
The review follows a government-commissioned study examining competition within South Korea’s virtual asset trading sector and the regulatory factors shaping market structure.
According to the report, obtained by business outlet Herald Economy, the exchange-bank pairing system may reinforce dominance by large platforms by restricting banking access for smaller operators. Researchers found that applying the same compliance standards across exchanges with vastly different risk profiles and trading volumes could create disproportionate burdens.
The study also noted that South Korea’s won-based crypto market remains highly concentrated, with liquidity and transaction efficiency largely favouring major exchanges. In such conditions, incumbents are more likely to maintain their dominance when barriers to entry remain high.
Regulatory review tied to digital asset basic act
The competition review comes as South Korea prepares the next phase of its crypto regulatory framework, known as the Digital Asset Basic Act.
Lawmakers delayed submitting the bill until 2026 after failing to reach a consensus on how to supervise domestic stablecoin issuers. The proposed law, supported by President Lee Jae-myung, would permit the issuance of won-pegged stablecoins while requiring issuers to place reserve assets with approved custodians, such as banks.
A key point of debate is whether a dedicated authority should pre-approve stablecoin issuers. The FSC is reportedly weighing how to enforce oversight while still allowing participation from non-financial technology firms.
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