South Korea reviews one exchange–one bank rule as competition worries rise
South Korea’s financial authorities are reviewing the long-running practice that effectively ties each crypto exchange to a single domestic banking partner.
The Herald Economy said the review is being coordinated between the Financial Services Commission (FSC) and the Fair Trade Commission as regulators assess whether the framework is hurting competition, reports Cointelegraph.
While the “one exchange–one bank” setup isn’t written directly into law, it became the industry norm through anti-money laundering (AML) and customer due diligence requirements. In practice, exchanges have relied on exclusive banking deals to offer won deposits and withdrawals, making fiat access a key gatekeeper for market participation. Policymakers now appear to be questioning whether that structure unintentionally favors incumbents. Any shift could reshape how smaller platforms compete — and how banks price and manage crypto-related risk.
Competition concerns grow as market concentration tightens
The review reportedly follows a government-commissioned research project examining the structure of South Korea’s virtual asset trading market and the competitive impact of existing rules. The report, cited by the Herald Economy, suggested that exclusive exchange-bank pairings may reinforce market concentration by limiting banking access for newer or smaller exchanges. While the model is meant to reduce compliance risk, researchers argued that applying the same standards across exchanges with very different volumes and risk profiles may be disproportionate.
In highly concentrated markets, liquidity and transaction efficiency naturally gravitate toward the biggest venues, and strict entry barriers can deepen that advantage over time. That creates a feedback loop: dominant exchanges attract more users because they already have better liquidity. Regulators are now weighing whether the current system is a necessary safeguard — or a bottleneck that keeps competition from meaningfully expanding.
Digital Asset Basic Act looms as lawmakers debate stablecoin oversight
The competition review also comes as South Korea prepares the next phase of crypto regulation under the so-called Digital Asset Basic Act. Lawmakers delayed submission of the bill to 2026 after failing to reach agreement on how domestic stablecoin issuers should be supervised. The legislation, backed by President Lee Jae-myung, would allow won-pegged stablecoins while requiring issuers to place reserve assets with approved custodians such as banks.
The main unresolved issue is whether issuers should face pre-approval from a dedicated oversight body and how strict that process should be. Regulators are now trying to strike a balance between tighter guardrails and keeping the system open enough for fintech firms outside traditional banking to participate. Taken together, the debate signals that South Korea is moving from “contain crypto risk” toward “structure crypto markets,” with competition and stablecoins becoming the next major policy battleground.
Recently we wrote that the government of Bermuda plans to build a “fully onchain” national economy by leveraging digital asset infrastructure provided through a partnership with cryptocurrency exchange Coinbase and stablecoin issuer Circle.
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