South Korea is currently reevaluating its practice of linking cryptocurrency exchanges to a single banking partner, a move that could significantly impact competition in the nation’s digital asset market. This review, which involves both the Financial Services Commission (FSC) and the Fair Trade Commission, aims to assess the effectiveness of current regulations and explore potential reforms to improve market access and reduce concentration.
While the “one exchange–one bank” rule is not a formal law, it has become a common practice due to strict anti-money laundering (AML) regulations and customer due diligence requirements. As a result, crypto exchanges have relied on exclusive partnerships with domestic banks to provide fiat on- and off-ramps for customers.
Regulatory Review Could Open Up South Korea’s Crypto Market
The ongoing regulatory review follows a government-commissioned study that analyzes the impact of current crypto regulations on market competition. According to the study, the one-bank model may be reinforcing market concentration by making it harder for smaller or newer exchanges to gain banking partnerships.
The research found that the current system favors large, established exchanges, which dominate the market in terms of liquidity and transaction volume. Smaller players often struggle to secure banking relationships, which restricts their ability to compete effectively. By limiting access to banking services, the “one exchange–one bank” model may be hindering the growth of a more diverse and competitive crypto market in South Korea.
Impact of the Digital Asset Basic Act on Crypto Exchange Regulations
The review of the one-bank model comes as South Korea prepares to advance the Digital Asset Basic Act, a comprehensive piece of legislation aimed at regulating digital assets. The act, which is expected to be finalized in 2026, will establish clearer rules for crypto exchanges and the issuance of stablecoins.
One of the key provisions of the bill is the authorization of won-pegged stablecoins, which would require issuers to store reserve assets with approved custodians like banks. However, debates around how to oversee stablecoin issuers and whether a dedicated regulatory body should approve them have delayed the bill’s passage. As the government moves forward with this legislation, regulatory changes to the banking model could play a crucial role in fostering a more competitive and balanced crypto ecosystem.
