The one-exchange-one-bank mannequin shouldn’t be a authorized requirement however is extensively adopted.
A authorities examine discovered the setup limits entry for small crypto exchanges.
Giant platforms dominate Korean won-based buying and selling because 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 usually hyperlinks every crypto change to only one financial institution, limiting alternative and creating excessive entry obstacles for smaller corporations.
Although this setup isn’t formally required by legislation, it has turn out to be widespread because of anti-money laundering and identification verification guidelines.
The Monetary Providers Fee and the Honest Commerce Fee at the moment are coordinating a overview to see whether or not this long-standing apply is stifling competitors and reinforcing the dominance of some giant exchanges.
Guidelines could favour larger exchanges
Beneath the present system, exchanges must kind unique partnerships with home banks to permit prospects to deposit and withdraw Korean received.
With out that hyperlink, they will’t provide primary fiat companies.
The mannequin emerged in response to rising calls for for transparency and danger management, however could now be working towards smaller market contributors.
A current examine commissioned by the federal government explored how present crypto rules impression competitors.
Based on 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 companies.
Although it helps handle monetary dangers, making use of the identical strict requirements throughout the board could also be extreme when corporations fluctuate in measurement, quantity, and danger profile.
The examine additionally famous that the majority Korean won-based crypto buying and selling occurs on only a few giant platforms, making the market extremely concentrated.
Liquidity hole highlights entry obstacles
The analysis identified that when just a few platforms dominate buying and selling quantity, they profit from deeper liquidity and sooner transactions.
This creates a cycle the place customers are extra possible 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, cut back innovation, and limit client choices.
Consequently, the present setup could possibly be reinforcing the place of already-powerful exchanges, slightly than encouraging wholesome competitors.
Lawmakers delay key digital asset invoice
The overview of crypto-banking hyperlinks comes alongside delays in broader legislative modifications.
The Digital Asset Primary Act, which is predicted to reshape the nation’s crypto regulation, was initially scheduled for submission earlier than the top of 2023.
Nevertheless, 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 authorized custodians akin to banks.
The delay stems from disagreements over the best way to supervise stablecoin issuers and whether or not a brand new oversight physique ought to pre-approve them.
The Monetary Providers Fee can also be weighing the best way to enable each monetary and non-financial corporations to participate on this sector with out compromising on security.
The aim is to assist innovation whereas sustaining robust regulatory safeguards.
