South Korea to reform crypto rules, boost competition

South Korea will end the one exchange-one bank rule and drop the exchange ownership cap, aiming to boost competition and fairness in the crypto market.

South Korea is set to overhaul its digital asset regulatory framework by abolishing the "one exchange-one bank" restriction. This move will allow the issuance of crypto derivatives and enable corporate accounts to participate in trading, aiming to break the current market monopoly and improve liquidity. Although not legally required, the restriction has remained due to anti-money laundering measures, limiting competition and user choice. The Financial Services Commission and Fair Trade Commission are now reviewing the relationships between local cryptocurrency exchanges and banks, as the current system often ties each exchange to a single bank, creating high entry barriers for smaller firms. A government-commissioned study found that this model restricts access for smaller exchanges and that uniform compliance rules may burden platforms with lower risks and volumes. Additionally, the ruling Democratic Party has decided to exclude a proposed exchange ownership cap from the upcoming Digital Asset Basic Act, signaling a strategic shift in South Korea's approach to crypto regulation.