After KB Financial Company and Shinhan Financial Group, Woori Financial Group has become South Korea’s third major banking group to join the digital asset custody services (DACS) sector, according to the Korean Economic Daily.
On July 11, the financial group’s banking arm 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.
Coinplug will be the biggest stakeholder in the D-Custody joint venture, with Woori Bank coming in second. According to sources, the JV will be formed as soon as next week.
Crypto custody is a service that securely holds and maintains digital assets, such as bitcoin, held by different individuals and organizations. The service’s popularity has risen recently, with a rising number of Korean businesses acquiring different kinds of cryptocurrencies for company diversification or investment reasons.
Last November, South Korea’s biggest bank, KB Kookmin Bank, established Korea Digital Asset Co. (KODA) with a local blockchain startup, 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 business established by Korbit, a digital asset exchange.
Crypto’s Status in Korea
South Korea is a nation in East Asia that is formally known as the Republic of Korea. The country’s population is about 51 million people, and its currency is the South Korean won. Seoul, South Korea’s capital, is located in the top part of the country.
South Korea’s economy benefits from a variety of factors, including technical advances, thanks in part to its busy capital and the country’s geography. North Korea, also known as the Democratic People’s Republic of Korea, has a border with South Korea.
Although the nation is known to host considerable crypto trading activity, the South Korean crypto landscape contains tight restrictions on some fronts.
Bitcoin (BTC) often trades at prices higher than the rest of the market on South Korean platforms, leading to the coining of the phrase “Kimchi premium” to describe the price differential between South Korean Bitcoin and the rest of the market.
Korean law presently prohibits domestic companies from using bitcoin trading services. As a result, businesses and organizations in Korea must store their cryptocurrencies on their own storage devices, such as USB drives, posing a significant risk of theft or loss.
Digital asset owners have been advocating for the development of digital asset custody services in such a legal framework.
While these organizations would prefer that the country’s banks retain their digital assets since banks have historically been extremely trustworthy custodians, Korea’s present regulations prohibit banks from joining the crypto industry directly. That is why Korean banks are forming DACS JVs in which they control just a portion of the company.