TLDR
- South Korea is reviewing the practice of linking each crypto exchange to a single banking partner.
- The Financial Services Commission and the Fair Trade Commission are leading the review.
- The practice emerged due to Anti-Money Laundering and customer due diligence requirements.
- A government-commissioned study found that the model limits access to banks for smaller exchanges.
- Researchers said that applying uniform compliance rules may burden platforms with lower risks and volumes.
South Korea is reviewing the long-standing practice that ties each crypto exchange to a single banking partner, according to local media reports, and the country’s financial regulators are jointly evaluating how the current system may restrict competition among trading platforms and limit banking access for smaller players.
Authorities Review Bank-Exchange Model Under Regulatory Scrutiny
The Financial Services Commission (FSC) and the Fair Trade Commission are jointly reviewing current practices across the virtual asset market. The review follows concerns about how the “one exchange–one bank” model affects fair competition.
Although not written into law, this model formed due to Anti-Money Laundering (AML) and due diligence compliance rules. Under this practice, exchanges must secure individual partnerships with banks to manage fiat deposits and withdrawals.
Officials involved in the discussions told the Herald Economy that the arrangement is being reassessed based on a commissioned research project. The study examined the structure of the local digital asset market and its regulatory framework.
The report concluded the model could strengthen market concentration and restrict new exchanges from accessing basic banking services. Researchers said the approach lacks flexibility, especially when applied to platforms of different sizes and risk levels.
As the won-based crypto market remains concentrated around a few large platforms, liquidity continues to favor dominant exchanges. This raises concerns that new players may struggle with user acquisition and fiat integration due to restricted bank access.
Study Finds Impact on Competition and Market Structure
According to the report, large exchanges benefit from better liquidity and faster transaction speeds. These factors create advantages that are difficult for smaller competitors to match.
The study also pointed out that centralized trading volumes can create inefficiencies in pricing and user choice. Researchers emphasized that uniform rules might burden smaller exchanges with limited resources.
By relying on exclusive bank deals, the market limits competition and innovation among newer platforms. Government officials now seek to assess whether proportional rules could better reflect exchange size and compliance capability.
A senior official reportedly stated, “We are reviewing if differentiated requirements can apply based on volume and risk exposure.”
This approach may help decentralize trading activity and broaden market participation.
The ongoing discussions reflect a shift in how South Korea views crypto oversight and financial inclusion. The study’s findings are currently under review across agencies and will guide future steps.
South Korea Delays Crypto Law to 2026
The review process comes as South Korea drafts its second phase of crypto regulations under the Digital Asset Basic Act. Lawmakers delayed submitting the bill until 2026 due to disagreements about stablecoin oversight.
The proposed law would allow issuance of won-pegged stablecoins, while requiring reserve assets to be held by authorized custodians. However, officials remain divided over whether a dedicated body should pre-approve stablecoin issuers.
The FSC is analyzing how to balance supervision with innovation in the crypto sector. The delay aims to ensure the framework accommodates both financial and non-financial firms.
President Lee Jae-myung supports the proposal and has urged regulators to finalize the policy structure. Officials plan to integrate the findings of the banking model review into the upcoming legislative framework.
