The South Korean crypto exchange Bithumb has signed a banking partnership with Kookmin (KB), one of the biggest financial providers in the country.
Experts say the deal represents a “tectonic shift” in the domestic traditional finance and crypto sectors.
Whereas South Korean crypto exchanges once had to win banks over, tradfi firms are now actively pursuing deals with coin trading platforms, analysts believe.
Bithumb’s Brand-new Banking Deal
Bithumb trading volumes over the past 12 months. (Source: CoinGecko)The deal has been in the pipelines since at least August last year, when Cryptonews.com reported that Bithumb was preparing to dump its long-term partner NongHyup Bank (NH) in favor of a deal with the latter’s rival KB.
The South Korean newspaper Electronic Times reported that sources familiar with the deal said Bithumb will start migrating its customers from NH to KB “on February 24.”
A branch of Kookmin (KB) Bank in South Korea. (Source: KBS News/YouTube/Screenshot)KB Eager to Woo Crypto-keen South Korean Youth
The bank and Bithumb will also open “account pre-registration” facilities before the migration officially begins.
The outlet added that “a reorganization” of partner banks’ deals with major exchanges was now “possible” as regulators hold discussions related to the Industrial Promotion Act.
Both Bithumb and KB are hoping the deal will help them boost their market presence.
The exchange currently has a market share of 20%, but is hoping to gain ground on Upbit as it chases a New York Stock Exchange listing.
The media outlet called Bithumb’s move “a strategic decision.” It pointed out that KB “has a solid base of 20-39 year-old customers.
This demographic is key in the South Korean crypto market, where younger citizens remain extremely crypto-keen.
Over 50% of the users of the KB Star Banking personal finance app are aged between 20 and 39.
KB is also one of only two banks that offer the Nara Sarang Card, a special banking platform for young Korean men conscripted to the military.
South Korean military conscripts. (Source: KBS Docu/YouTube/Screenshot)A Banking Sea Change
In the second half of last year, KB claimed to have over 22 million account holders and 12.62 million monthly active users (MAUs).
Bithumb said it was “preparing promotions” for the “upcoming pre-registration” in a bid to “create synergy” with the KB user base.
NH, meanwhile, has the lowest MAU figures among the nation’s five biggest banks, while some claimed that the process of opening a crypto wallet-linked bank account on its platform was “complicated.”
Bithumb has partnered with NongHyup since 2018, the year when regulators forced domestic exchanges to seek banking partners.
The banks provide exchanges with real name-verified fiat on/off ramp bank accounts for each customer.
If exchanges fail to find banking partners, they cannot offer their clients fiat-to-crypto trading.
This legal change effectively put the vast majority of South Korea’s crypto exchanges out of business.
Only the “big four” exchanges – Bithumb, as well as the market leader Upbit, Coinone, and Korbit – were initially able to secure banking deals.
A fifth exchange, GOPAX, was later able to secure a banking deal with Jeonbuk Bank. But following the collapse of the FTX exchange and an unsuccessful takeover attempt from Binance, GOPAX has found itself in danger.
‘New Atmosphere in South Korean Banking Sector’
Unnamed South Korean crypto industry insiders said the deal was “a specific example” of a new “atmosphere” whereby South Korean banks “are focusing on exchanges as new business partners.”
This is a radical change and a “reversal” from the situation in 2018, when exchanges “had to put all their efforts into forming partnerships with banks,” the newspaper wrote.
More pro-crypto “changes in the financial industry are expected to accelerate,” the outlet added. An anonymous crypto industry insider explained:
“As regulators are now actively discussing fostering the domestic crypto industry, exchanges are finding that banks are keener than ever to do business with them.”
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