Korean Banks Rush to Secure Stakes in Crypto Custody Firms

Banks in Korea are scrambling to secure stakes in crypto custody firms as demand for digital asset services grows. BitGo Korea, a company about 25% owned by Hana Financial Group, has completed its virtual asset service provider (VASP) registration with the Financial Intelligence Unit and begun full-scale entry into Korea's custody market.

Sh Suhyup Bank and iM Bank have also invested in Infinite Block, a custody firm, becoming joint second-largest shareholders with about 15% each. Regional and specialized banks are joining the race to secure their own 'coin vault.'

The banks' entry into the custody market is logical, as managing customers' assets is functionally similar to the trust business they have long operated.

According to the financial industry, most major banks have secured stakes in crypto custody firms. KB Kookmin Bank set up Korea Digital Asset (KODA) in 2020, while Shinhan Bank and NH NongHyup Bank invested in KDAC. Hana Financial Group holds a stake in BitGo Korea through its banking, securities, and financial-IT affiliates.

Banks are competing for custody stakes because demand is bound to grow as more corporations and institutional investors enter the crypto market. If a spot bitcoin exchange-traded fund (ETF) is introduced, custody firms will be needed to hold the underlying assets on behalf of asset managers.