• The one-exchange-one-bank mannequin just isn’t a authorized requirement, however it’s broadly adopted.
• A authorities investigation discovered that this setting limits entry for small cryptocurrency exchanges.
• Giant platforms dominate Korean won-based buying and selling resulting from superior liquidity.

South Korea’s high regulator is reportedly reviewing how the nation’s crypto exchanges work with banks, with the goal of making a extra balanced taking part in area.

The present system typically hyperlinks every crypto change to just one financial institution, limiting choices and making a excessive barrier to entry for small and medium-sized companies.

Though this setting just isn’t formally required by regulation, it’s broadly used resulting from anti-money laundering and identification verification laws.

The Monetary Companies Fee and the Truthful Commerce Fee are presently coordinating an investigation to find out whether or not this long-standing follow stifles competitors and strengthens the management of some giant exchanges.

Guidelines might give giant exchanges a bonus

The prevailing system requires exchanges to kind unique partnerships with home banks to permit clients to deposit and withdraw Korean gained.

With out that hyperlink, we can not present primary fiat companies.

This mannequin emerged in response to rising calls for for transparency and danger administration, however might presently work towards smaller market contributors.

A current government-commissioned research checked out how present cryptocurrency regulation impacts competitors.

Researchers concluded that the one-to-one setup with change banks makes it tough for brand spanking new or small exchanges to entry banking companies, based on findings reported by native media outlet Herald Economic system.

Though it helps handle monetary danger, making use of the identical rigorous requirements throughout the board could be overkill for firms of various sizes, dimensions, and danger profiles.

The research additionally identified that the market is very concentrated, with most South Korean won-based crypto transactions going down on only a few giant platforms.

Liquidity hole highlights boundaries to entry

The research notes that when a small variety of platforms dominate buying and selling quantity, these platforms profit from deeper liquidity and sooner buying and selling.

This creates a cycle during which customers are extra probably to decide on bigger gamers, additional limiting the attain of smaller exchanges.

So long as entry to banks stays tough, that sample is unlikely to alter.

This focus can scale back market vitality, scale back innovation, and restrict shopper alternative.

In consequence, the present regime might find yourself reinforcing the place of already highly effective exchanges fairly than fostering wholesome competitors.

Lawmakers postpone key digital belongings invoice

The assessment of digital forex banking hyperlinks comes alongside delays in broader authorized reform.

The Digital Asset Primary Legislation is anticipated to restructure the nation’s cryptocurrency laws and was initially scheduled to be submitted by the top of 2023.

However on Dec. 31, lawmakers postponed that to 2026.

The invoice proposes to permit the issuance of stablecoins backed by the Korean gained, so long as the issuing firm shops its reserve belongings in an accredited custodian, equivalent to a financial institution.

The delay stems from disagreements over how stablecoin issuers needs to be supervised and whether or not new regulators ought to pre-approve them.

The Monetary Companies Fee can also be contemplating methods to allow each monetary and non-financial firms to take part on this space with out compromising safety.

The aim is to assist innovation whereas sustaining robust regulatory safety.