Commercial Banks Without Real-Name Account Partnerships Seek Indirect Entry Through Custody Business and Others
[Asia Economy Reporter Jin-ho Kim] Despite the heated controversy surrounding virtual currencies, major commercial banks continue to show direct and indirect interest. While banks respond that it is 'not easy' to partner with real-name accounts due to significant legal risks such as money laundering, they show high interest in indirect businesses such as custody services and business partnerships. This is analyzed as a preemptive response to blockchain technology applied to virtual currencies and central bank digital currencies (CBDC).
According to the financial sector on the 8th, major banks such as KB Kookmin, Woori, and Hana Bank, which do not have real-name account partnerships with virtual currency exchanges, are focusing on the 'virtual currency custody business' through business partnerships.
These banks have previously stated that they have no plans for direct partnerships with virtual currency exchanges. This judgment is based on the fact that the risks of money laundering, hacking, and the recent extreme volatility of virtual currency values outweigh the benefits. Therefore, instead of real-name account partnerships, they decided to indirectly collaborate with virtual currency exchanges in preparation for the increasing demand for digital assets.
In November last year, Kookmin Bank partnered with blockchain companies Hatch Labs and Hashed to establish Korea Digital Asset (KODA), a virtual asset custody service company aiming to play the 'role of a digital bank.' KODA provides services that safely store and manage virtual currencies such as Bitcoin and Ethereum. On the 17th of last month, it signed a Bitcoin custody contract with game company Wemade and began full-scale operations.
Woori Bank is also promoting a custody business. It is known that plans to invest in shares of related companies are currently under review. A Woori Bank official said, "We are having various discussions regarding digital asset businesses such as custody with Bithumb." Woori Fund Service, wholly owned by Woori Bank, also collaborated with PeerTech, operated by the virtual currency exchange 'Gidac,' to launch a digital asset management platform. This service manages and supports accounting, taxation, and trading for companies holding virtual currencies.
The banks' keen interest in the custody business is analyzed as an effort to increase their understanding of blockchain technology. A banking industry official said, "It should be seen as interest in the inherent blockchain technology rather than the direct value of virtual currencies," adding, "From the perspective of security and transparency, blockchain technology is likely to be the most actively used across the entire financial sector in the future."
In fact, in 2017, Woori Bank and Shinhan Bank considered introducing an overseas remittance service that could send money easily and quickly anywhere in the world by utilizing the blockchain technology of the virtual currency Ripple.
There is also the purpose of responding to the Bank of Korea's digital currency (CBDC) distribution. The know-how accumulated through the custody business could be helpful in future CBDC projects. The Bank of Korea started a public bidding process to select a business operator for a pilot study on basic CBDC functions, investing about 5 billion KRW from August. According to the industry, Shinhan Bank and Hana Bank are reportedly preparing bids.
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