Major South Korean banks are pushing for a change in the country’s crypto policy to allow them to partner with multiple crypto exchanges. The proposed change, reported by local outlet MT, emerged during a meeting organized by the Korea Federation of Banks with lawmakers from the ruling People Power Party. Executives from five top banks, including Woori Bank CEO Jeong Jin-wan, raised concerns about the existing one-bank-per-exchange framework, which they argue limits customer choice and places unnecessary strain on the financial system.
Jeong emphasized that the current setup restricts consumer flexibility and hinders competition in the banking sector. He believes that allowing multiple banks to work with a single exchange would create a more resilient and user-friendly environment for both retail and institutional clients. South Korea introduced the one-to-one rule in 2018 to enforce anti-money laundering standards in the crypto industry, requiring exchanges to partner with a single bank and mandate that users complete real-name verification with the bank tied to their chosen platform.
Critics argue that the one-bank-per-exchange rule has outlived its usefulness and restricts user access and innovation within the financial sector. The rigid system forces exchanges to rely heavily on a single banking partner, increasing operational risk and reducing user service options. Concerns about the systemic risk of exclusive exchange-bank relationships have been raised, particularly regarding Upbit, the country’s largest crypto exchange, which has K Bank as its sole banking partner.
South Korean lawmakers have highlighted the potential vulnerabilities associated with the heavy reliance of Upbit on K Bank. This partnership could potentially lead to a liquidity crisis at the bank if there is a disruption in Upbit’s operations. If the government revises the policy to allow exchanges to choose from a broader range of financial partners, it could result in improved services, better risk management, and more investment opportunities for both retail and institutional players. This change could also lead to better user experience in the crypto industry.
