A digital board at Bithumb headquarters in Seoul shows cryptocurrency prices on March 29 (Yonhap)
South Korea’s cryptocurrency market is on a solid path to becoming further legitimized with banks calling for authorization to enter the business and the incoming president pledging to ease regulations.
Asia’s fourth-largest economy’s crypto market is booming, with Koreans having invested a total 52.8 trillion won ($43.6 billion) in the digital asset class last year in terms of the combined size of the accounts held by five major crypto exchanges, watchdog Financial Supervisory Service data submitted to a lawmaker here showed Thursday. Of the total, investors in their 20s and 30s held 19.4 trillion won in the accounts, or 36 percent of the pie. The five major crypto exchanges here are Upbit, Bithumb, Coinone, Korbit and Gopax.
Seeking to ride the wave, local banks are currently preparing to submit a request with incoming President Yoon Suk-yeol’s presidential transition committee to allow them to enter the crypto business, industry sources said Thursday.
Sources say that the Korea Federation of Banks, a representative body of commercial banks here, has sent domestic lenders to review a draft of requests to submit to the transition committee, with a key demand being the permission to deal with crypto. The draft reportedly expressed concerns of a “certain local crypto exchange” accounting for 90 percent of the market share, and called for a license for banks to deal with crypto to prevent monopolization in the market. The KFB’s most notable members include the top five commercial banks -- KB Kookmin, Shinhan, Hana, Woori and NongHyup -- alongside the online-only KakaoBank and K bank.
Traditional banks in Korea are currently seeking new revenue sources in nonbanking sectors, but face several legal restrictions in branching out. This is dissimilar to big tech firms like Naver and Kakao, which have been successfully fostering their financial services.
But they have been nonetheless actively seeking to get a foot in the door. Shinhan Financial Group is currently reviewing investment in Korbit, for which it has been providing real-name accounts for the crypto exchange users, while KB Investment, KB Financial Group’s investment arm last month funneled 10 billion won into Gopax.
Crypto exchanges in Korea are growing at an unprecedented pace, bolstered by retail investors flocking to the digital asset market.
Dunamu, operator of Upbit, posted a net income of 2.2 trillion won last year, with the figure growing 46-fold on-year. The news shocked onlookers, as it drew near Woori Financial Group, a major banking group here. Woori posted a net income of nearly 2.6 trillion won in the same period. Dunamu’s operating profit increased by 37 times on-year to nearly 3.3 trillion won in the cited period.
Meanwhile, Dunamu’s industry rival Bithumb Korea, operator of Bithumb, saw its net profit jump 427 percent to 672.8 billion won on-year in 2021.
South Korea’s crypto market is forecast to see a further boom under Yoon, as he pledged to adopt several crypto-friendly measures. His pledges include reducing taxation on crypto gains, reducing the chance of the incumbent Moon Jae-in administration’s plan to impose tougher crypto income taxes on investors whose gains exceed 2.5 million won from being realized.
Nodding toward the fast-growing market, experts are warning the incoming Yoon administration to come up with additional measures that could shield investors from heavy losses.
“The incoming administration should establish a new and strong regulatory system by considering the characteristics of cryptocurrency,” said Kim Kap-lae, a research fellow at the Korea Capital Market Institute at a forum hosted by the Korea Digital Asset Service Provider Association on March 17.
“The lack of an information disclosure system has been preventing crypto investors from receiving necessary information,” he added.