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Think Tank Tells South Korean Banks: Start Offering Crypto Custody Services

Banking

Bitcoin

Cryptocurrency Custody

South Korea

Last updated: June 26, 2023 06:54 EDT

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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Last updated:

June 26, 2023 06:54 EDT

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A research paper from an influential South Korean think-tank has recommended that banks enter the crypto custody and blockchain-as-a-service (BaaS) spaces to end their reliance on interest-based income sources.

Per the news agency Yonhap, Lee Soon-ho, a senior researcher from the Seoul-based Korea Institute of Finance (KIF) made the recommendation in a recent report entitled Recent Banking Industry Trends and Strategic Directions for Banking Business Diversification.

In the report, Lee wrote that banks needed to move away from business models whereby they “still make most of their profit from interest” from loans, mortgages and other similar financial products. Instead, Lee wrote, “cryptoasset custody business operations” could provide domestic banks with “a way to diversify their income.”

Lee also opined that “highly reliable banks” were already “making moves to provide cryptoasset custody services” – likely referring to initiatives spearheaded by the likes of Kookmin (KB) and NongHyup (NH), which have both been vying to enter the crypto custody space along with their most crypto-keen rival Shinhan.

Lee wrote:

“Domestic banks are already showing an interest in BaaS or cryptoasset custody as new business spheres.”

BaaS, Lee added, allows non-financial companies to engage in “relatively highly regulated banking business areas” that make use of next-generation technology. And BaaS offerings, the researcher added, could help companies outside the financial sector “provide banking services without obtaining a license.”

Banks could earn money by charging commission rates for BaaS clients.

However, the KIF researcher warned that without the necessary legislative framework, banks would not be able to expect the support they needed to make such a proposal work.

Lee concluded:

“There is no clear regulatory protocol or law regarding cryptoasset custody and trading. It is thus necessary to prepare a law as soon as possible to increase the reliability and transparency of the cryptoasset market.”

The KIF was formed in 1990, with the blessing of the Finance Ministry, under the leadership of 32 domestic banks. The group advises banks on policy and business-related matters and retains connections with a number of government policy-making organs.
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