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By Lee Min-hyung
Korean banks are moving to make rapid inroads into the "digital custody" business or the safekeeping of cryptocurrency by enhancing partnerships with blockchain-powered security players.
Given the unprecedented global craze for cryptocurrency transactions, the market for the service is widely expected to grow at an alarming pace.
Banks are seeking to take advantage of the new source of revenue by enhancing ties with tech-savvy startups that specialize in developing blockchain security software.
NongHyup Bank formed a three-way consortium last year with Hexlant, a Seoul-based blockchain software developer, and Taepyeongyang law firm.
Other major lenders, such as KB and Shinhan, are also tapping into the field by either buying stakes in related companies or setting up a joint venture to provide digital custody services.
"Most first-tier banks here continue to eye digital expansion, and the digital custody service is one of the promising profit areas amid growing demand for cryptocurrency investments," a bank industry source said.
"Banks still have to rely on loan-to-deposit margins, but they want to cut the reliance and find new areas for growth amid the rise of digital banking," the official said. "Even if the digital custody service may not generate outstanding returns from a near-term viewpoint, banks are betting on its huge growth potential."
Financial watchdogs do not welcome the rise of cryptocurrencies, as they may pose a threat to the authority of the nation's own currencies. This is the case for most countries around the world, but no one can refute the fact that the cryptocurrency market is displaying explosive growth. Banks expect this trend to continue in the foreseeable future, because a growing number of companies such as Tesla allows customers to make transactions with cryptocurrencies.
"Many people cite security concerns as the cryptocurrency market grows, but banks keep urging their partnering virtual currency exchange to strengthen security levels," another bank official said. "The market for security services of digital assets will be on a gradual rise."
