Banks ambivalent about crypto partnerships
Amid the recent rally in the cryptocurrency market, banks are exhibiting various levels of performance depending on whether they entered into partnerships with cryptocurrency exchanges.
Banks that forged partnerships with coin exchanges early on by providing real-name account authentication services, which is required for every cryptocurrency exchange in Korea, have gained an advantage over those that did not, particularly in terms of commission profits and new business strategies in the ever-increasing virtual asset markets.
Kbank, which has long partnered with Upbit, Korea’s largest coin exchange where over 70 percent of the country’s cryptocurrency transactions are taking place, has undoubtedly become the largest beneficiary of the latest cryptocurrency asset boom, succeeding at garnering both new users as well as handsome commission fees.
The internet-only bank said its number of customers has grown to over 10 million as of the end of last month. It said Wednesday that it garnered about 510,000 new customers in the first two months of this year, and approximately 10 percent of the new customers began using the bank in order to be authenticated for their real-name accounts for their coin trading at Upbit.
Given that individuals in Korea must deposit and withdraw money with real-name accounts at banks affiliated with each coin exchange to participate in cryptocurrency trading, banks that have entered into real-name account contracts with cryptocurrency exchanges have seen an increase in commission revenue. Banks typically charge fees of up to 1,000 won (75 cents) per deposit or withdrawal transaction from the coin exchanges. It has been estimated that Kbank earned approximately 38.7 billion Korean won through Upbit from 2020 to the first half of 2022.
While the latest cryptocurrency market rally has been another boon for Kbank’s growth, there’s still a strong sense of hesitance and internal caution at major banks about establishing partnerships with coin exchanges.
For instance, KB Kookmin Bank recently held negotiations with Bithumb — Korea’s second-largest domestic cryptocurrency exchange by market share, only following Upbit — for its potential partnership in the real-name account authentication service for the coin exchange.
However, ultimately, it could not reach an agreement, due partly to the bank’s withdrawal from the deal over concerns that being associated with cryptocurrency exchanges may hurt its brand, despite the leading bank’s hope to venture into the cryptocurrency market and attract younger customers. Industry sources say the bank hoped to closely monitor the situation further, especially with the country’s first virtual asset investor protection act, which is set to be enforced in July.
The general attitude of the banks toward partnering with coin exchanges is said to be, thus, ambivalent in that they are eager to establish partnerships with cryptocurrency exchanges for anticipated commission profits, to diversify their source of non-interest profit but are concerned about uncertainties, such as their service being misused for criminal endeavors like money laundering.
This attitude was pronounced when the Korea Federation of Banks reduced the daily deposit limit for virtual asset exchanges from 10 million won to 5 million won last month.
Currently, Upbit is partnering with Kbank for real-name account authentication, Bithumb with NH NongHyup Bank, Coinone with KakaoBank, Korbit with Shinhan Bank and GOPAX with Jeonbuk Bank.