South Korea’s NH Bank Looking to Launch Crypto Custodial Services

Today NH NongHyup Bank in South Korea announced a partnership with blockchain company Hexlant and BKL Law Firm in which the three will form a consortium to research business models related to digital assets. The consortium is thought to be a response to the recent passing of landmark legislation which outlines specific rules for operating digital assets businesses in the country.

The three companies will work jointly to study cryptocurrency-related business strategies that comply with the new law while providing information based on their specific specializations.

BKL will provide extensive in-depth legal advice on various business models from exchanges, areas related to money transfers and funds that deal with cryptocurrency. They will provide analysis on those business models that pertains to anti-money laundering (AML) and the special law.

Hexlant will be responsible for system security verification and construction of the blockchain infrastructure for future platforms and services that may come out of the consortium. Hexlant gained attention from the domestic blockchain industry by being selected by TIPS for financial support in their business fund last September. That selection raised the capabilities of Hexlant to extend resources to a wider variety of projects, culminating in this new partnership.

BKL Law Firm and Hexlant have worked closely together before. As recently as last March, Hexlant Blockchain Laboratories and BKL published a special report on the analysis of virtual currency regarding guidelines for the amendment to the Act on Special reporting of Specific Financial Transactions. At the time, they planned to continue their separate partnership in an effort to study the industry’s cryptocurrency regulations, then publish an insight report unrelated to the new consortium with NH Bank.

NH NongHyup Bank plans to build a digital asset custody platform similar to Bitgo or Coinbase Custody. In that vein, NH Bank is expressing concerted dedication to launching a custody platform where users can safely buy and store their digital assets. NH Bank would be among the first in Korea’s traditional finance field to delve into digital assets custody along with KB Bank who recently announced plans to launch a custody platform.

Seunghyung Jang, Senior Vice chairman of NH Bank commented that “[The flow of digital transformation around the world is changing the definition of assets.]”

A crypto custody platform would put NH Bank and its new partners in a position to corner a market which will soon become prohibitively expensive to be a part of without significant financial assets. As per the new law, exchanges that want to operate in South Korea must have a real-name account sponsorship from a domestic bank and a ISMS certification from KISA. The certification cost begins around $200k which is more than most SME’s can bear. With nearly 200 exchanges in South Korea alone, there will be a culling of low-income exchanges. The financial obligation is expected to thin out the total players in the blockchain and cryptocurrency industries in South Korea by the time the law is enacted next year.

Expect the crypto custody field to take shape as other banks will likely follow suit behind NH Bank and KB Bank.

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