South Korea Lenders See Political Transition as Chance to Revamp Crypto Sector

Leading banks in South Korea are urging the incoming administration to revamp financial regulations that limit their role in the virtual asset sector.

The call reflects a broader ambition among lenders to compete more effectively with tech firms and gain entry into fast-evolving nonbanking markets.

The Korea Federation of Banks revealed Tuesday that it had recently held a strategy meeting with senior leaders from major banks, a local outlet reported.

The session resulted in a proposal calling for regulatory changes that would allow traditional financial institutions to participate more directly in the digital asset economy.

“Regulatory revisions are necessary to enable banks, backed by their credibility, accessibility and strong consumer protection standards, to enter the virtual asset business,” the federation said.

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The timing aligns with South Korea’s presidential transition. Voters cast ballots on Tuesday to elect a new leader after months of political uncertainty and the impeachment of President Yoon Suk Yeol. The banking industry sees this leadership change as a chance to push for long-stalled reforms. It is currently unclear when the result will emerge.

The crypto market is already undergoing shifts. In May, South Korean authorities introduced new rules to govern digital asset transactions, part of a broader move to prepare for institutional participation in the sector.

These regulations, which take effect in June, allow both nonprofit groups and virtual asset exchanges to sell cryptocurrencies. However, they must comply with tighter disclosure standards and meet enhanced listing requirements.

Despite South Korea’s ranking as the world’s third-largest crypto market by trading volume, the country has yet to establish a comprehensive regulatory framework. Around one-third of the population holds digital assets, and crypto-related policies featured prominently in recent campaign pledges, including promises to legalize spot crypto ETFs and regulate stablecoins.

Banks are stepping up efforts to position themselves within the space, exploring services such as stablecoin issuance and digital asset trusts. However, they remain constrained by existing rules that block entry into non-financial sectors. In contrast, tech firms face fewer restrictions and can integrate financial services into broader business operations, which banks argue creates a competitive imbalance.

To address this, the federation called for broader permissions across sectors like retail, logistics, and ICT. It also urged a shift toward principle-based regulation, allowing more flexibility for both core banking and subsidiary functions.

The report criticized vague provisions in the Banking Act that make enforcement unpredictable and called for clearer definitions and time-bound regulatory actions.

Banks intend to gather more feedback and present a final set of proposals once the new government is in place. As South Korea looks to stabilize its economy and tech sector, lenders hope to play a stronger role in shaping the country’s financial trajectory.

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