The banking sector has called for regulatory improvements to allow banks with strong credibility, accessibility, and consumer protection standards to enter the virtual asset business. (Image courtesy of Yonhap)
SEOUL, June 4 (Korea Bizwire) — South Korea’s banking industry is calling on the incoming administration to open the door for greater involvement in the digital asset space and non-financial sectors, while also seeking regulatory reforms in investment advisory services, trust systems, and enforcement transparency.
According to banking officials on June 3, the Korea Federation of Banks has drafted a list of policy proposals based on input gathered during a recent strategy meeting of senior bank executives. The document outlines the industry’s key requests ahead of the June presidential transition.
At the top of the list is a call to revise laws that currently prohibit banks from engaging in virtual asset-related businesses. Although banks play a central role in issuing verified accounts for cryptocurrency exchanges and contribute to market stability, their operations remain confined by the Financial Services Industry Act, which does not classify virtual assets as part of permissible banking activities.
“Banks—backed by credibility, accessibility, and consumer protection—should be allowed to provide custody and wallet services in the digital asset ecosystem,” one bank official said. The move is widely seen as a precursor to allowing banks to issue and manage won-denominated stablecoins.
Banks also reiterated their long-standing demand for access to non-financial sectors, citing a lack of regulatory parity with big tech firms that freely combine financial and non-financial services.
They argued that restrictions on banks’ involvement in retail, logistics, travel, and ICT-related services hinder innovation and competitiveness.
The proposal advocates for a shift toward a “principles-based regulatory approach” that would ease limits on banks’ subsidiary ownership and business scope in line with broader industry convergence trends.
In the investment advisory space, banks are requesting permission to manage discretionary investment services—an activity currently restricted—at least for public funds, similar to models in the U.S. and Canada.
They are also pushing for broader trust capabilities to better serve South Korea’s aging population and rising demand for asset management services.
Additionally, the industry voiced concern over the ambiguity and open-ended nature of current enforcement practices. While most financial laws specify clear grounds for disciplinary action, the Banking Act grants regulators broad latitude, making it difficult for banks to predict what constitutes a violation.
The proposal calls for clearer definitions of sanctionable offenses and the introduction of a statute of limitations for regulatory enforcement, akin to the Administrative Procedures Act, to prevent drawn-out investigations based on decades-old infractions.
The banking federation plans to refine its recommendations further and officially submit them after the new government takes office later this year.
M. H. Lee (mhlee@koreabizwire.com)
