Kabang and Coinone Join Forces... Is a Major Shift Coming in the Cryptocurrency Market?

First Case of Bank Providing Real-Name Verified Deposit and Withdrawal Accounts
Coinone, Expectations for Performance Improvement
However, "Rapid Growth Like Upbit Will Be Difficult"

[Asia Economy Reporter Lee Jung-yoon] Coinone, the third-largest cryptocurrency exchange in South Korea, and KakaoBank, an internet-only bank, are in discussions to provide real-name verified deposit and withdrawal accounts. As Upbit, the leading exchange, secured a contract with another internet-only bank, K Bank, to provide real-name verified deposit and withdrawal accounts and rose to the top market share, there are expectations that Coinone will also see performance improvements.

According to industry sources on the 3rd, Kim Seok, Chief Strategy Officer (CSO) of KakaoBank, stated during the Q3 earnings conference call held the previous day, "We are in talks to provide real-name verified deposit and withdrawal account services to Coinone customers in November to enhance the stability and convenience of virtual asset transactions."

Previously, Coinone and KakaoBank signed a contract for the issuance of real-name verified deposit and withdrawal account confirmation certificates. Discussions are currently underway, and if KakaoBank provides real-name verified deposit and withdrawal accounts to Coinone, the existing accounts with NH Nonghyup Bank will be switched to KakaoBank. This will also mark the first case where the bank providing real-name verified deposit and withdrawal accounts to an exchange changes.

Currently, financial authorities maintain a one-exchange-one-bank system for reasons including anti-money laundering and investor protection. Under the current Act on Reporting and Using Specified Financial Transaction Information (Special Act on Financial Transactions, or "Spec Act"), exchanges must secure real-name verified deposit and withdrawal accounts from banks to trade cryptocurrencies in Korean won, but the number of banks is not specified. However, if an exchange contracts with multiple banks, depositing through Bank A and withdrawing through Bank B could make it difficult to track money laundering or movement paths, so financial authorities appear to maintain the current system.

An official from the Financial Intelligence Unit (FIU) under the Financial Services Commission said, "Issuance of real-name verified deposit and withdrawal accounts is a private contract between the bank and the exchange, but banks bear social responsibility for managing money laundering in virtual asset exchanges. If the bank providing real-name verified deposit and withdrawal accounts to Coinone changes to KakaoBank, it will need to maintain management standards at least equal to or higher than those of the existing Nonghyup Bank."

Industry insiders widely believe this partnership will be positive for Coinone. This is because KakaoBank, as an internet-only bank, offers the advantage of relatively easy non-face-to-face account opening.

The case of Upbit and K Bank supports this argument. Upbit partnered with K Bank in June 2020 to launch Korean won deposit services. Subsequently, thanks to the ease of non-face-to-face account opening, aggressive marketing, convenient user interface (UI) and user experience (UX), and a booming cryptocurrency market, Upbit surpassed Bithumb to become the market leader. Dunamu, the operator of Upbit, saw its operating revenue soar sharply from 140.2 billion KRW in 2019 to 176.7 billion KRW in 2020, and then to 3.7046 trillion KRW last year.

However, it is assessed that Coinone will find it difficult to achieve the same rapid growth as Upbit. Professor Hong Ki-hoon of Hongik University's Department of Business Administration said, "Unlike before, the cryptocurrency market is currently in a slump, so the likelihood of a sudden surge in investor inflow like Upbit is low."