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The South Korean cryptocurrency exchange Bithumb may terminate its longstanding banking relationship with NongHyup Bank in favor of a partnership with competitor Kookmin Bank.
Various reports from sources such as Insight Korea and Mega Kyungjae cited unnamed banking and cryptocurrency industry insiders who claimed that discussions with Kookmin (KB) have reached a successful conclusion.
Bithumb Banking Agreement: A Potential New Partner for the Exchange?
Bithumb has collaborated with NongHyup (NH) since 2018, a period when exchanges were mandated to establish banking partnerships.
According to South Korean regulations, only exchanges with real name-verified fiat on/off ramp bank accounts are permitted to offer fiat-crypto trading pairs.
Historically, exchanges and banks have entered into long-term agreements (typically one or two-year contracts). Bithumb has engaged in multiple one-year rolling contracts with NH.
However, NH’s latest contract renewal only extended its agreement with Bithumb for six months. This arrangement is set to expire on September 24.
Bithumb has stated that “no decisions have been made yet,” and indicated that it could not provide further comments on the situation.
Nevertheless, media reports have indicated that Bithumb has already submitted the necessary banking documentation to the financial regulator.
If the regulators approve this documentation, a potential agreement with KB could be initiated as soon as late September.
A branch of Kookmin Bank in South Korea. (Source: Kwangmo [CC BY-SA 4.0])
Favorable Financial Outcomes
The timing of this potential shift is likely to attract attention within South Korea’s dynamic cryptocurrency community. This week, Bithumb announced a partnership with NH that enables its users to create crypto wallet-linked bank accounts through its exchange platform.
Bithumb has also reported positive financial outcomes for the second quarter of the fiscal year.
Supported by the bullish cryptocurrency market, the exchange recorded a 639.2% rise in operating profits compared to FY2023 Q2. Its revenue also surged by 193.6% to KRW 242.9 billion ($180 million), as reported by Bloter.
Trading volumes on South Korea’s Bithumb crypto exchange over the past week. (Source: CoinGecko)
KB Targets Younger Demographic
Media reports suggest that KB’s strategy is aimed at attracting a younger clientele. Mega Kyungjae noted that KB’s leader Lee Jae-geun aims to “create a significant distinction from competing banks” through a “digital retail” approach.
Lee is reportedly focused on expanding KB’s customer base among affluent young South Koreans.
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The bank is targeting individuals aged 20-49, a demographic that constitutes 77% of its customer base.
It has identified growth potential within the 30-39 age group, which accounts for 1.89 million (29.3%) users.
Younger South Koreans are known for their enthusiasm for cryptocurrency. Thus, securing a partnership with Bithumb, the country’s second-largest trading platform, could assist KB in reaching its objectives.
Reports have indicated that banking app data for users in their 30s shows that KB has lagged behind neobanks such as Toss and Kakao Bank in recent years.
In 2022, Kakao Bank established a banking partnership with Bithumb’s competitor Coinone.
Not Only Bithumb: Competitors Also Pursuing Banking Partnerships
Earlier this week, GOPAX, another competitor of Bithumb, finalized a last-minute contract with its long-term partner Joenbuk Bank.
The exchange is currently awaiting approval for a takeover bid that would allow cloud provider Megazone to acquire Binance’s majority stake in the platform.
South Korean CEO Arrested for ‘$366 Million Crypto-themed Fraud’
The South Korean CEO of a tech firm has been arrested for allegedly orchestrating an Ethereum (ETH) -themed crypto fraud scheme that affected around 500 victims.#CryptoNews https://t.co/Ky1j2kOq7o— Cryptonews.com (@cryptonews) August 12, 2024
Bithumb aims to improve its position against its largest rival, Upbit, which currently holds nearly 65% of the South Korean cryptocurrency exchange market share.
Trading volumes on South Korea’s Upbit crypto exchange over the past week. (Source: CoinGecko)
An unnamed official from the cryptocurrency industry “familiar with the situation” stated that Bithumb and KB have “reached a favorable agreement.” The source remarked:
“Ultimately, the primary factor was an influx of young individuals. This indicates that [the parties] will compete with Upbit for market share in the future.”
South Korea jobless rate falls to 2.5% in July https://t.co/cEhBERNlaD pic.twitter.com/YafJvKu4Al
— Reuters (@Reuters) August 14, 2024
Upbit’s Market Dominance
Much of Upbit’s success is attributed to its collaboration with another neobank, K Bank.
Many believe that the Upbit-K Bank partnership’s “ease of account opening and deposits/withdrawals” has enabled it to capture a significant portion of the market.
KB has also recently achieved a notable success by forming a partnership with Samsung’s financial division. This agreement will allow KB to provide banking services to the Samsung financial platform app Monimo. Mega Kyungjae elaborated:
“This collaboration is likely to enable KB to attract Samsung’s premium customers by offering services that Samsung Financial Group currently lacks.”
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