By Lee Min-hyung
Korea's commercial banks are expanding their use of blockchain technologies that underpin cryptocurrencies amid surging demand for digital asset transactions.
Major lenders here remain wary of jumping directly into the cryptocurrency market, as they may lose more than they gain if caught in even a minor security issue surrounding virtual asset transactions.
But they are moving to keep a closer watch on the market by signing partnerships with blockchain tech companies and enhancing research and development capabilities in the area of blockchain and digital transaction securities.
Starting from 2020, KB Kookmin Bank, the nation's largest bank, has teamed up with crypto asset investment firm Hashed and established a joint venture, the Korea Digital Asset (KODA). The company launched a digital asset custody service on Monday.
The service allows cryptocurrency investors to securely keep their assets from external hacking threats, and it also enables corporate clients to buy and sell digital assets in a safer manner, according to the lender.
Shinhan Bank, another top-tier lender in Korea, also made equity investments in the Korea Digital Asset Custody (KDAC) by partnering with Korbit, a Seoul-based cryptocurrency exchange. The KDAC also offers a similar custody service for corporate and individual customers making digital asset transactions.
"A growing number of banks are expected to show interest in jumping into the digital currency custody market, as it comes with huge growth potential in line with the global cryptocurrency boom," a bank industry official said.
"Demand for safer custody of customers' digital assets will grow bigger down the road. Banks also need to keep a close eye on other cryptocurrency-linked business areas, even if they cannot engage in them directly due to watchdogs' negative sentiments toward cryptocurrency investment."
Hana Bank has also signed a partnership with Pohang University of Science and Technology (POSTECH) to establish a pilot system to test virtual circulation of a central bank digital currency (CBDC).
Under the project, the lender will test a variety of scenarios over whether the Bank of Korea's virtual CBDC can be circulated just like real money.
Other financial players in the areas of securities and cards are also eyeing investments in the digital asset market. Hanwha Investment & Securities recently acquired a 6.2 percent stake in Dunamu, the operator of Upbit, a cryptocurrency exchange here.
Visa Card and Mastercard also unveiled their plans to begin facilitating cryptocurrency transactions soon. But unlike banks, it appears too early for Korean card firms to take similar steps, as regulatory hurdles remain tightly in place for the time being.