Korean banks enter digital asset custody market in quick succession
Nan-sae Bin
Jul 11, 2021 (Gmt+09:00)
Another major bank, NH Bank, on July 8 announced plans to kick off its digital asset business together with Korea Information & Communications Co. and Hexlant Inc., a blockchain startup that develops digital wallet technologies.
CURRENT REGULATIONS IN KOREA
Korea currently doesn’t allow domestic entities to use services provided by cryptocurrency exchanges. Thus, the companies and organizations in Korea must keep their cryptocurrencies in their own storage drives such as USBs, meaning a high risk of theft or loss.
In such a regulatory environment, digital asset-owning organizations have been calling for an expansion of digital asset custody services.
While these organizations would ideally want the country’s banks to keep their digital assets, as banks have traditionally been highly reliable custodians, Korea’s current laws also forbid the banks from directly entering the DACS market. That’s why the Korean banks are setting up DACS JVs with only partial ownership.
“In overseas markets, the digital asset custody has become a successful, established practice among the new services offered by the banks,” said an official of Woori Bank.
Unlike in Korea, the banks in Japan and Switzerland have been offering DACSs directly to the organizations in demand. The US financial regulators last year also officially allowed the financial sector to provide DACS services.
Korea’s banking experts highlight that the DACS market is essentially a low-risk business that can provide another stable revenue stream for the banks.
They highlight that unlike cryptocurrency trading, which the country’s major banks have shied away from given high financial risk surrounding the unpredictability, the DACS model works in a way similar to that of the traditional banking sector.
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