Woori Bank of Woori Financial Group is now providing digital asset custody services (DACS) in a joint venture (JV) with a bitcoin-based fintech solutions provider Coinplug Inc. With a hike in popularity, Digital asset custody services are spreading across institutions in South Korea.
South Korea’s KB Kookmin Bank, largest among the top four banks in the nation, became the first to have entered the DACS market with Haechi Labs, a local blockchain firm, along with Hashed, a blockchain-oriented venture fund. To implement the same, KB had set up a Korea Digital Asset Co. (KODA) last year. Following KB, Shinhan Bank joined the clan of crypto in Korea in 2021. Shinhan Bank became a strategic investor of Korea Digital Asset Custody Co. (KDAC), a DACS company founded by the digital asset exchange Korbit.
The newest addition has been this month itself, with NH Bank’s announcement of its upcoming joint venture (JV) in Digital asset custody services with Korea Information & Communications Co. and Hexlant Inc., a blockchain startup that develops digital wallet technologies.
“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,” said KODA COO Cho Jin-Seok, former chief of KB Kookmin Bank’s IT Technology Innovation Center.
Joint Ventures in DACS; low risk & high profit
There has been a significant hike in the demand for digital asset custody services in Korea, as more and more organizations have started to invest in cryptocurrencies.
After the 2017 crypto boom, Korea tightened its crypto regulations, and to this day, local Korean investors are finding loopholes to actively participate in the crypto community. The demand to waive off rigid regulations on crypto trade and exchange has been rising with an increased threat to the security of present digital asset holdings.
It is against the law in Korea to use services facilitated by crypto exchanges, which has led to high-risk storage of large crypto investments in USBs. Institutions are demanding banks to store their digital assets, however Korean laws do not allow the banks to directly enter the DACS market, leading to DACS JVs with only partial ownership.