Korean banks press for crypto reforms

Korea Herald

4 days ago

South Korea's commercial banks are urging the incoming administration to overhaul financial regulations, aiming to expand their presence in the virtual asset space and gain access to a wider range of nonbanking business opportunities.
The Korea Federation of Banks said Tuesday that it recently convened a meeting of senior strategy managers from major lenders to collect views on increasing banking participation in cryptocurrency markets.
Following the discussion, the group drafted a proposal arguing that virtual assets remain outside the scope of traditional banking, despite lenders' growing role in the digital asset ecosystem — including the issuance of real-name accounts used for crypto trading.
'Regulatory revisions are necessary to enable banks, backed by their credibility, accessibility and strong consumer protection standards, to enter the virtual asset business,' the group of banks said in the report.
The appeal comes as a new government prepares to take office following Tuesday's presidential election. Despite being home to the world's third-largest crypto market by trading volume, and with roughly a third of its population involved in digital assets, South Korea has yet to build a comprehensive regulatory framework to support the industry's growth.
Crypto-related policy proposals were central to the campaigns of leading presidential candidates, including promises to approve spot crypto exchange-traded funds and to incorporate stablecoins into formal oversight mechanisms.
Against this backdrop, banks are stepping up efforts to position themselves in the sector, exploring services such as digital asset trusts and stablecoin issuance.
The report also reiterated the banking industry's longstanding call to lift restrictions on entering non-financial sectors. Banks argue they face stricter oversight than big tech firms, which are free to offer integrated services blending financial and nonfinancial functions — creating what they describe as an 'uneven playing field.'
To address this, banks called for a broader range of noncore businesses — including retail, logistics, travel and information and communication technology — to be permitted as ancillary operations, while also urging a shift toward principle-based regulation for both ancillary activities and subsidiary ownership, in response to accelerating industry convergence.
Banks also used the report to voice frustration over current enforcement practices, criticizing the Banking Act for vague provisions that make regulatory actions hard to anticipate. They called for clearer definitions tied to statutory obligations and the introduction of a formal statute of limitations on penalties.