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South Korea’s financial regulators are reviewing a long-standing practice that effectively ties each cryptocurrency exchange to a single banking partner, as part of a broader examination of competition in the country’s crypto market, according to local media.
Business media outlet the Herald Economy, <a href="https://biz.heraldcorp.com/article/10658868" rel="noopener noreferrer nofollow" target="_blank">citing</a> government officials familiar with inter-agency discussions, said a review effort is being coordinated between the Financial Services Commission (FSC) and the Fair Trade Commission as policymakers evaluate whether existing practices contribute to market concentration.&nbsp;
Although the “one exchange–one bank” model is not explicitly codified in South Korean laws, it emerged in practice due to Anti-Money Laundering (AML) and customer due diligence requirements.&nbsp;
As a result, crypto exchanges have typically relied on exclusive partnerships with domestic banks to provide fiat on- and off-ramps for customers.
<h2 id="competition-study-raises-concerns-over-market-structure">Competition study raises concerns over market structure</h2>
The policy discussions reportedly follow a government-commissioned research project that analyzes the virtual asset trading market and the competitive impact of key regulations in South Korea.&nbsp;
The study examined the structure of the crypto market and assessed how existing regulations may affect competition among domestic exchanges.&nbsp;
The report, obtained by the Herald Economy, concluded that the exchange-bank pairing model may reinforce market concentration by limiting banking access for newer or smaller exchanges.&nbsp;
While the model aims to manage compliance risk, the study found that applying uniform standards to exchanges with different risk profiles and volumes may be disproportionate.&nbsp;
The researchers highlighted that the Korean won-based crypto market remains highly concentrated around a small number of large platforms.
In such markets, the study reportedly found that liquidity and transaction efficiency tend to favor dominant players, potentially entrenching incumbents when barriers to entry persist.&nbsp;
Related: <a href="https://cointelegraph.com/news/korea-busts-101m-remittance-ring-wechat-crypto-wallets" rel="noopener noreferrer nofollow">South Korea busts $100M underground remittance ring using WeChat, crypto: Report</a>
<h2 id="south-korea-prepares-for-digital-asset-basic-act">South Korea prepares for Digital Asset Basic Act</h2>
The reported review comes as regulators prepare the second phase of South Korea’s crypto legislation, commonly <a href="https://cointelegraph.com/news/south-korea-crypto-bill-stablecoins-delay" rel="noopener noreferrer nofollow">referred to as the Digital Asset Basic Act</a>.&nbsp;
On Dec. 31, lawmakers delayed the submission of the bill to 2026 amid unresolved disagreements over how domestic stablecoin issuers should be supervised.&nbsp;
The proposed legislation, backed by President Lee Jae-myung, would allow the issuance of won-pegged stablecoins while requiring issuers to entrust reserve assets to authorized custodians such as banks.&nbsp;
The debate centers on <a href="https://cointelegraph.com/news/why-south-korea-is-struggling-to-decide-who-can-issue-stablecoins" rel="noopener noreferrer nofollow">whether a dedicated oversight body should pre-approve issuers</a>, with the FSC reviewing how to balance oversight with a framework that allows participation from non-financial technology companies.&nbsp;<iframe width="100%" height="315" src="https://www.youtube.com/embed/UtcU34rcn50?start=" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen loading="lazy" sandbox="allow-scripts allow-same-origin allow-popups allow-forms"></iframe>
Magazine: <a href="https://cointelegraph.com/magazine/how-crypto-laws-changed-2025-further-2026/" rel="noopener noreferrer nofollow">How crypto laws changed in 2025 — and how they’ll change in 2026</a>

South Korea weighs ending one-bank rule for crypto exchanges: Report

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