To enter the crypto custody industry while adhering to local rules, a growing number of central South Korean banks are forming joint ventures with minimal ownership.
The group’s banking unit, Woori Woori Financial Group, has become the latest major South Korean financial institution to declare it will introduce digital asset custody services, according to a July 11 story from The Korean Economic Daily.
A bank is forming a digital asset custody joint venture called D-Custody with Coinplug, a Bitcoin-based fintech service business.
D-largest Custody’s stakeholder will be Coinplug, followed by Woori Bank. The incorporation of the joint venture is planned in the following weeks.
Domestic companies are not permitted to use the services of cryptocurrency exchanges under current Korean law, which means that the country’s banks may only participate in the crypto market through joint ventures or share investments.
While local banks are barred from joining the digital asset custody business directly, a growing number of large Korean financial institutions are forming joint ventures with partial ownership to acquire a foothold in the field. According to a Woori Bank official:
“In overseas markets, the digital asset custody has become a successful, established practice among the new services offered by the banks.”
Kookmin Bank, Shinhan Bank, NH Nonghyup Bank, and Woori Bank, four of South Korea’s five central banks, had stated their plan to provide crypto custody services as of August 2020.
In March 2020, Kookmin, the country’s largest banking institution, submitted a trademark application for its custody service before forming Korea Digital Asset Co. in November with the help of venture capital company Hashed and local blockchain service startup Haechi Labs.
Nonghyup Bank announced intentions to establish a custody company with Korea Information & Communications Co. in June 2020, after forming a blockchain financial services consortium with blockchain firm Hexlant.
Shinhan Bank stated in January 2021 that it had taken a strategic investment in Korea Digital Asset Trust, a crypto custody consortium sponsored by Korbit, a prominent local exchange.