The one-exchange-one-bank mannequin isn’t a authorized requirement however is broadly adopted.
A authorities research discovered the setup limits entry for small crypto exchanges.
Giant platforms dominate Korean won-based buying and selling on account of higher liquidity.
South Korea’s high regulators are reportedly reviewing how native cryptocurrency exchanges work with banks, aiming to create a extra balanced taking part in discipline.
The present system typically hyperlinks every crypto trade to only one financial institution, limiting selection and creating excessive entry limitations for smaller companies.
Although this setup isn’t formally required by legislation, it has grow to be widespread on account of anti-money laundering and identification verification guidelines.
The Monetary Companies Fee and the Truthful Commerce Fee are actually coordinating a assessment to see whether or not this long-standing observe is stifling competitors and reinforcing the dominance of some giant exchanges.
Guidelines could favour larger exchanges
Below the prevailing system, exchanges have to kind unique partnerships with home banks to permit clients to deposit and withdraw Korean received.
With out that hyperlink, they’ll’t provide fundamental fiat providers.
The mannequin emerged in response to rising calls for for transparency and threat management, however could now be working towards smaller market contributors.
A current research commissioned by the federal government explored how present crypto rules impression competitors.
In line with findings reported by native outlet Herald Economic system, researchers concluded that the one-to-one exchange-bank setup makes it tougher for newer or smaller exchanges to entry banking providers.
Although it helps handle monetary dangers, making use of the identical strict requirements throughout the board could also be extreme when companies differ in dimension, quantity, and threat profile.
The research additionally famous that almost all Korean won-based crypto buying and selling occurs on only a few giant platforms, making the market extremely concentrated.
Liquidity hole highlights entry limitations
The analysis identified that when a number of platforms dominate buying and selling quantity, they profit from deeper liquidity and sooner transactions.
This creates a cycle the place customers are extra probably to decide on the larger gamers, additional limiting the attain of smaller exchanges.
So long as banking entry stays troublesome, that sample is unlikely to vary.
This focus could make the market much less dynamic, scale back innovation, and limit shopper choices.
In consequence, the present setup may very well be reinforcing the place of already-powerful exchanges, slightly than encouraging wholesome competitors.
Lawmakers delay key digital asset invoice
The assessment of crypto-banking hyperlinks comes alongside delays in broader legislative adjustments.
The Digital Asset Primary Act, which is anticipated to reshape the nation’s crypto regulation, was initially scheduled for submission earlier than the top of 2023.
Nonetheless, on December 31, lawmakers pushed it again to 2026.
The invoice proposes permitting the launch of stablecoins backed by the Korean received, so long as the issuing firms retailer their reserve property with accredited custodians resembling banks.
The delay stems from disagreements over the way to supervise stablecoin issuers and whether or not a brand new oversight physique ought to pre-approve them.
The Monetary Companies Fee can also be weighing the way to permit each monetary and non-financial companies to participate on this sector with out compromising on security.
The objective is to help innovation whereas sustaining sturdy regulatory safeguards.
