The one-exchange-one-bank mannequin is just not a authorized requirement however is broadly adopted.
A authorities research discovered the setup limits entry for small crypto exchanges.
Massive platforms dominate Korean won-based buying and selling as a result of higher liquidity.
South Korea’s prime regulators are reportedly reviewing how native cryptocurrency exchanges work with banks, aiming to create a extra balanced taking part in subject.
The present system usually hyperlinks every crypto change to only one financial institution, limiting alternative and creating excessive entry limitations for smaller companies.
Although this setup isn’t formally required by legislation, it has change into widespread as a result of anti-money laundering and id verification guidelines.
The Monetary Providers Fee and the Honest Commerce Fee at the moment are coordinating a evaluation to see whether or not this long-standing apply is stifling competitors and reinforcing the dominance of some giant exchanges.
Guidelines might favour greater exchanges
Underneath the prevailing system, exchanges must kind unique partnerships with home banks to permit clients to deposit and withdraw Korean gained.
With out that hyperlink, they’ll’t supply primary fiat providers.
The mannequin emerged in response to rising calls for for transparency and threat management, however might now be working towards smaller market members.
A current research commissioned by the federal government explored how present crypto laws affect competitors.
Based on findings reported by native outlet Herald Financial system, researchers concluded that the one-to-one exchange-bank setup makes it more durable for newer or smaller exchanges to entry banking providers.
Though it helps handle monetary dangers, making use of the identical strict requirements throughout the board could also be extreme when companies range in dimension, quantity, and threat profile.
The research additionally famous that almost all Korean won-based crypto buying and selling occurs on just some giant platforms, making the market extremely concentrated.
Liquidity hole highlights entry limitations
The analysis identified that when just a few platforms dominate buying and selling quantity, they profit from deeper liquidity and quicker transactions.
This creates a cycle the place customers are extra seemingly to decide on the larger gamers, additional limiting the attain of smaller exchanges.
So long as banking entry stays tough, that sample is unlikely to vary.
This focus might make the market much less dynamic, scale back innovation, and prohibit shopper choices.
Consequently, the present setup might be reinforcing the place of already-powerful exchanges, somewhat than encouraging wholesome competitors.
Lawmakers delay key digital asset invoice
The evaluation of crypto-banking hyperlinks comes alongside delays in broader legislative adjustments.
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.
Nonetheless, on December 31, lawmakers pushed it again to 2026.
The invoice proposes permitting the launch of stablecoins backed by the Korean gained, so long as the issuing firms retailer their reserve belongings with accepted custodians akin to banks.
The delay stems from disagreements over learn how 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 learn how to enable each monetary and non-financial companies to participate on this sector with out compromising on security.
The objective is to help innovation whereas sustaining robust regulatory safeguards.
