Following KB Financial Group, Shinhan Financial Group, and NH Nonghyup Bank, Woori Financial Group has become South Korea’s third major banking group to enter the digital asset custody services (DACS) industry.
On July 11, the financial group’s banking unit Woori Bank agreed to form a digital asset custody joint venture (JV) with bitcoin-based fintech solutions provider Coinplug Inc, according to the banking industry.
While local banks are barred from joining the digital asset custody business directly, a rising number of large Korean financial institutions are forming joint ventures with partial ownership in order to acquire a position in the industry. A Woori Bank representative stated:
In overseas markets, the digital asset custody has become a successful, established practice among the new services offered by the banks
Last November, South Korea’s largest bank, KB Kookmin Bank, established Korea Digital Asset Co. (KODA) with a local blockchain firm, Haechi Labs, and a blockchain-oriented venture fund, Hashed, to enter the DACS market.
Shinhan Bank, meanwhile, entered the picture early this year as a strategic investor in Korea Digital Asset Custody Co. (KDAC), another DACS firm created by Korbit, a digital asset exchange. KODA COO Cho Jin-Seok, former chief of KB Kookmin Bank’s IT Technology Innovation Center said,
The digital asset custody contracts must abide by the same customer identification and anti-money laundering systems currently run by the banks. Unlike the cryptocurrency trading business that has a high level of uncertainties, the banks understand that the digital asset custody business can be largely under their control and also falls under their expertise area
In contrast to Korea, banks in Japan and Switzerland have been directly supplying DACS to organizations in demand. Last year, US financial authorities gave the green light to the banking industry to supply DACS. Korea’s banking experts emphasize that the DACS sector is fundamentally a low-risk company that may provide banks with another consistent revenue stream.
They point out that, unlike cryptocurrency trading, which has been avoided by the country’s main banks due to significant financial risks associated with unpredictability, the DACS model operates similarly to that of conventional banking.
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