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Tim Alper
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Tim Alper
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The South Korean crypto exchange Bithumb could shun its long-term banking partnership with NongHyup Bank in favor of a deal with rival bank Kookmin.
Multiple reports from outlets including Insight Korea and Mega Kyungjae quoted anonymous banking and crypto industry sources as claiming talks between Kookmin (KB) have successfully concluded.
Bithumb Banking Deal: A New Partner for Crypto Exchange?
Bithumb has partnered with NongHyup (NH) since 2018, when exchanges were legally obliged to seek banking partners.
Under South Korean law, only exchanges with real name-verified fiat on/off ramp bank accounts can offer fiat-crypto pairings.
In the past, exchanges and banks have signed long-term deals (one or two-year contracts). Bithumb has signed several one-year rolling contracts with NH.
However, NH’s most recent contract renewal saw it extend its Bithumb deal for just six months. This deal is due to expire on September 24.
Bithumb has insisted that “nothing has been decided yet,” and claimed that it could not comment further on the matter.
But media outlets said that Bithumb has already sent the relevant banking documentation to the financial regulator.
If regulators approve this documentation, a potential KB deal could be activated as early as late September.
Positive Financial Results
The timing of the move will raise eyebrows in South Korea’s vibrant crypto community. This week, Bithumb announced a deal with NH that allows its customers to open crypto wallet-linked bank accounts via its exchange platform.
Bithumb has also unveiled positive financial results for the second quarter of the financial year.
Buoyed by the crypto bull market, the exchange posted a 639.2% increase in operating profits compared to FY2023 Q2. Its sales also increased 193.6% to KRW 242.9 billion ($180 million), Bloter reported.
KB Eyes Younger Client Base
Media outlets say the KB move is part of a new pivot toward younger customers. Mega Kyungjae reported that KB chief Lee Jae-geun wants to “create a huge gap with rival banks” with a “digital retail” strategy.
Lee reportedly wants to boost KB’s client base among wealthier young South Koreans.
The bank wants to target customers aged 20-49, a group that represents 77% of bank customers.
It has earmarked growth in the 30-39 year-old demographic, which represents a 1.89 million (29.3%) tranche of users.
Younger South Koreans are famously crypto-keen. And securing a deal with Bithumb, the nation’s second-biggest trading platform, could potentially help KB achieve its goal.
Media outlets noted that banking app data for users in their 30s shows that KB has fallen behind neobanks like Toss and Kakao Bank in recent years.
In 2022, Kakao Bank signed a banking partnership deal with the Bithumb rival Coinone.
Not Just Bithumb: Rivals Also Making Banking Moves
Earlier this week, GOPAX, another Bithumb rival, secured an eleventh-hour contract with its own long-term partner Joenbuk Bank.
The exchange is awaiting approval for a takeover bid that would see cloud provider Megazone buy out Binance’s majority stake in the platform.
Bithumb is hoping to gain ground on its biggest competitor, Upbit. The latter still accounts for almost 65% of the South Korean crypto exchange market share.
An unnamed crypto industry official “familiar with the situation” said that Bithumb and KB have “reached a good deal.” The source said:
“Ultimately, the key factor was an influx of young people. And this is a signal that [the parties] will compete with Upbit for market share in the future.”
Upbit Dominance
Much of Upbit’s success has been attributed to its partnership with another neobank, K Bank.
Many think that Upbit-K Bank’s “accessibility of account opening and deposits/withdrawals” has helped it corner the lion’s share of the market.
KB has also secured a recent coup by striking a deal with Samsung’s financial arm. The deal will see KB provide banking services to the Samsung financial platform app Monimo. Mega Kyungjae explained:
“This partnership will likely see KB secure Samsung’s premium customers in exchange for providing services that Samsung Financial Group does not have.”
