- The one-exchange-one-bank model is not a legal requirement but is widely followed.
- A government study found the setup limits access for small crypto exchanges.
- Large platforms dominate Korean won-based trading due to better liquidity.
South Korea’s top regulators are reportedly reviewing how local cryptocurrency exchanges work with banks, aiming to create a more balanced playing field.
The current system often links each crypto exchange to just one bank, limiting choice and creating high entry barriers for smaller firms.
Though this setup isn’t officially required by law, it has become widespread due to anti-money laundering and identity verification rules.
The Financial Services Commission and the Fair Trade Commission are now coordinating a review to see whether this long-standing practice is stifling competition and reinforcing the dominance of a few large exchanges.
Rules may favour bigger exchanges
Under the existing system, exchanges need to form exclusive partnerships with domestic banks to allow customers to deposit and withdraw Korean won.
Without that link, they can’t offer basic fiat services.
The model emerged in response to growing demands for transparency and risk control, but may now be working against smaller market participants.
A recent study commissioned by the government explored how current crypto regulations impact competition.
According to findings reported by local outlet Herald Economy, researchers concluded that the one-to-one exchange-bank setup makes it harder for newer or smaller exchanges to access banking services.
Even though it helps manage financial risks, applying the same strict standards across the board may be excessive when firms vary in size, volume, and risk profile.
The study also noted that most Korean won-based crypto trading happens on just a few large platforms, making the market highly concentrated.
Liquidity gap highlights entry barriers
The research pointed out that when a few platforms dominate trading volume, they benefit from deeper liquidity and faster transactions.
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