According to a recent report, major banks in South Korea plan to venture into crypto custody as they seek to expand their operations, primarily through blockchain-based activities. This comes after a regulatory change in the Asian nation, making it okay for banks to enter the field. Since inception, cryptocurrencies have faced various challenges, especially with regulators who have struggled to develop the proper definition of what they are and how they should be controlled.
One such bank is KB Kookmin Bank, which is one of the biggest banks in the country. The institution has entered into a strategic technology cooperation partnership with Hashed, a blockchain venture, and Cumberland Korea, a Bitcoin trading platform, to conduct custody for crypto assets together.
According to Simon Kim, CEO at Hashed, this partnership will usher in a new digital transformation era in South Korea by offering technical and commercial consultation, which will eventually open new doors for consumers.
The announcement by KB resonates with that of its main rival NongHyup better known as NH Bank. At the start of July, NH said it planned to create its own custodial services for digital assets, but its focus would only be on institutional investors. So far, the bank has already established a digital innovation department that will be in charge of the operation and any other blockchain-related venture.
OCC gives the go-ahead for US banks
It’s not only South Korean banks that can enter the crypto custody market, but US institutions can too. This follows the green light by the Office of the Controller of the Currency (OCC), which announced it would let all nationally chartered banks engage in crypto custody services.
It’s a significant development for the crypto industry. Large financial institutions that are regulated are already used to safekeeping services like stock certificates, and now they can add on that.
The OCC guidance offers a level of comfort for banks that have been curious about cryptocurrencies, and those that are quite interested can now move forward to explore the area and add on their revenues.
Some experts believe the OCC’s green light could work in favor of banks since they are well established and already boast a loyal customer base, which makes it easy to transition to crypto-based services.
But these businesses will have to invest time and resources in understanding digital assets and the technology behind them. And to reliably cater to institutional and retail customers, they will have to achieve deep expertise on blockchain security and regulations that come with safeguarding crypto assets.
Crypto users are used to having established exchanges like Coinbase and relying on hardware wallets to safeguard their assets safely. The addition of banks on the list can only be seen as a positive since they can offer even better financial services. So, the custody race will be won by those that offer the best services at the best prices.
Additionally, institutional investors are expected to warm up to banks quickly since they have proved over time, they can be trusted.
Now banks face a race against time as they try to master new technologies required to launch crypto custody services. They have to decide whether they will develop their solutions in house or opt to hire/purchase the critical infrastructure systems. They will also have to consider what network they have to join that allows for instant settlements across different platforms. One that offers transparency, speed, and security while making the process more cost-effective. Most clients will prefer a custodian that will allow their assets to be used on multiple platforms to settle instantly.
Suppose you wonder what kind of customers banks should target with their new offering. In that case, these could be the likes of businesses or institutions that require a secure and efficient way to make international transfers each day like pension funds and wealth management firms.
Now with the go-ahead from the OCC, we are likely to see banks get more aggressive recruiting their teams either by hiring top talent within the crypto industry or even bidding to buy established blockchain firms that will aid their course.