Bithumb, South Korea’s second-largest cryptocurrency exchange, switched its banking partner from NH Bank to KB Kookmin Bank. Since the decision was made in December last year, over 1.5 million KB accounts have been linked to Bithumb. “We’re seeing the advantages of partnering with a major bank,” said a Bithumb representative.
Under current financial regulations, the country’s top five exchanges can partner with only one bank. Users must have an account at the exchange’s designated bank to trade on a particular exchange. This policy has intensified competition among banks to secure partnerships with exchanges in a bid to bolster profits by attracting crypto-related funds.
Bithumb had partnered with NH Bank for about seven years, from January 2018 until March 23. During that time, NH Bank attracted around 1.7 trillion won in crypto-related deposits, which it used for various investments and loans, generating significant profits.
But Bithumb decided to switch to KB Kookmin Bank in December last year. Bithumb aimed to grow its user base by teaming up with a larger bank, while KB was looking to bring in more deposits.
Since the partnership was announced, KB’s demand deposits have grown by over 3 trillion won from 151.5 trillion won at the end of December to 154.7 trillion won ($106 billion) as of March 21. Additionally, 1.52 million KB accounts have been registered with Bithumb.
Upbit, the country’s largest crypto exchange, has partnered with online bank K Bank since June 2020. Around 6.4 trillion won—roughly one-quarter—of K Bank’s total deposits (27.62 trillion won) are deposits tied to Upbit. K Bank’s customer base surged from 2.19 million in June 2020 to 13.39 million last month, with 6 million linked to Upbit.
Shinhan Bank is partnered with Korbit, the fourth-largest exchange, and Kakao Bank is affiliated with Coinone, the third-largest.
With Upbit’s contract with K Bank set to expire in October, banks are closely watching Upbit’s next move. Bithumb’s partner switch triggered a massive flow of funds and account transfers, and banks are expected to enter a fierce competition to win over Upbit.
K Bank remains confident that it can retain the partnership. “had a long and successful partnership with Upbit, and we expect it to continue,” said a K Bank official.
Woori Bank and Hana Bank are reportedly exploring potential partnerships with Upbit. “Woori Bank has never worked with crypto exchanges, but now that corporate crypto investments are permitted, it’s actively seeking a partnership with Upbit,” said an industry insider. Similarly, Hana Bank introduced its real-name verification system, Hana Certificate, on Upbit in October, signaling its intent to build ties. We added Hana Certificate because we’re interested in partnering with a crypto exchange,” said a bank official.
Banks are rushing to form these partnerships because they see crypto exchanges as a key source of low-cost daily deposits in the upcoming low-interest-rate environment. “The average daily trading volume on domestic crypto exchanges is nearing 4 trillion won,” said one bank official. “That’s essentially low-cost funding that can be used for lending to generate interest income.”
