• South Korean banks are being advised by a think tank to begin offering cryptocurrency custody services

  • According to a study paper published by an influential South Korean think tank, banks should enter the crypto custody and blockchain-as-a-service (BaaS) industries to reduce their reliance on interest-based income sources.

    In a recent paper titled Recent Banking Industry Trends and Strategic Directions for Banking Business Diversification, Lee Soon-ho, a senior researcher at the Seoul-based Korea Institute of Finance (KIF), made the recommendation.

    Lee stated in the report that banks needed to shift away from business models in which they “still make the majority of their profit from interest” on loans, mortgages, and other related financial products. Instead, “cryptoasset custody business operations,” according to Lee, might give domestic banks with a “way to diversify their income.”

    Lee also stated that “highly reliable banks” were already “making moves to provide cryptoasset custody services,” most likely referring to initiatives led by Kookmin (KB) and NongHyup (NH), both of which have been vying to enter the crypto custody space alongside their most crypto-keen rival Shinhan.

    Lee penned:

    “Domestic banks are already expressing interest in new business domains such as BaaS or cryptoasset custody.”

    BaaS, according to Lee, enables non-financial organizations to participate in “relatively highly regulated banking business areas” that employ next-generation technology. Furthermore, according to the researcher, BaaS offers could assist organizations outside of the financial industry in “providing banking services without getting a license.”

    Banks could profit by charging commission rates to BaaS customers.

    However, the KIF researcher cautioned that without the required regulatory framework, banks would be unable to receive the necessary backing to make such a proposal effective.

    Lee came to the following conclusion:

    “There is no defined regulatory procedure or regulation governing the custody and trade of cryptoassets. As a result, it is critical to draft legislation as quickly as possible in order to improve the trustworthiness and transparency of the cryptoasset market.”

    The KIF was established in 1990, with the approval of the Finance Ministry, and is led by 32 domestic banks. The group provides policy and business advice to banks and maintains contacts with a number of government policy-making bodies.

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