South Korea’s crypto market may be approaching a structural turning point as regulators reassess one of its most defining - and least debated - features: the tight, often exclusive relationship between cryptocurrency exchanges and domestic banks.
What was once seen as a practical compliance solution is now being questioned as a potential brake on competition.
Key Takeaways
South Korea is reviewing exclusive bank ties in crypto.
Regulators worry the model limits competition.
Smaller exchanges struggle to access won banking rails.
At the heart of the discussion is the so-called “one exchange–one bank” arrangement. Although never formally written into law, the model emerged organically as banks sought to minimize exposure to anti-money laundering and customer verification risks. By partnering with just one exchange, banks could limit oversight costs and reputational exposure while still participating in the fast-growing digital asset economy.
Over time, however, this risk-management approach became an industry norm. Most major exchanges now rely on a single banking partner to provide access to Korean won deposits and withdrawals. Without those fiat rails, exchanges are effectively locked out of the mainstream market, regardless of demand for their services.
Regulators question market balance
According to local reports, the Financial Services Commission and the Fair Trade Commission are coordinating a review of whether this system has distorted market dynamics. Their focus is not on crypto trading itself, but on whether banking access has become a gatekeeper that favors established players.
A government-commissioned research project appears to have triggered the renewed scrutiny. The study analyzed how regulatory frameworks shape competition in the virtual asset sector and reportedly concluded that exclusive bank partnerships make it significantly harder for new or smaller exchanges to enter the market.
Liquidity concentration reinforces dominance
The research highlights a familiar pattern in financial markets: liquidity tends to cluster around a small number of platforms. Once that happens, dominant exchanges benefit from deeper order books, faster execution and lower transaction friction. These advantages attract even more users, reinforcing their lead.
When banking access is scarce, challengers struggle to compete, even if they meet compliance standards. The study also questioned whether applying identical regulatory requirements to all exchanges makes sense, arguing that uniform rules may disproportionately burden smaller platforms with lower transaction volumes and risk profiles.
Signals of a broader policy shift
While no immediate policy changes have been announced, the review suggests a shift in regulatory thinking. Authorities appear increasingly willing to examine not just financial crime risks, but also how rules shape market structure and long-term competition.
This debate is unfolding alongside preparations for the next phase of South Korea’s crypto legislation, known as the Digital Asset Basic Act. Lawmakers recently delayed the bill’s submission to 2026 amid unresolved disagreements over stablecoin oversight, including whether issuers should face pre-approval and how reserves should be supervised.
The proposed framework would allow won-pegged stablecoins, with reserve assets held by approved custodians such as banks. That debate has further intensified questions about the role banks should play in the digital asset ecosystem.
Taken together, these developments suggest that South Korea is reassessing how tightly it wants to control access to crypto markets. If regulators decide the current banking model entrenches incumbents, changes to exchange-bank relationships could follow, reshaping one of the world’s most active crypto trading environments.
