이 기사는 2022년 05월 19일 07:53 thebell 에 표출된 기사입니다.

The recent sell-off of crypto assets caused by the collapse of Terra’s stablecoin project is rekindling the debate in South Korea on whether commercial banks can manage money deposited by cryptocurrency exchanges.

A massive market-wide sell-off of LUNA and TerraUSD (UST) tokens has triggered a sharp withdrawal of funds from bank accounts where major South Korean crypto exchanges deposited their customers’ money for trading.

Bithumb, Coinone, Korbit and Upbit are the country’s top four crypto exchanges. The Terra crisis has likely affected the former three in particular because LUNA is traded on their Korean won-denominated crypto trading platforms, meaning the panic sell-off probably led to a significant withdrawal of their customers’ trading deposits.

However, Upbit, which is operated by Dunamu, listed LUNA on its trading platform where transactions can be settled by crypto coins only. That was because of a conflict of interest as Dunamu purchased 20 million LUNA coins itself in April 2018.

The Terra crisis has again highlighted the volatility of deposits for crypto trading. Bithumb, Coinone and Korbit deposit their customers’ money with the commercial banks they partner with. Bithumb and Coinone are in partnership with NongHyup Bank, while Korbit’s partner is Shinhan Bank.

The two banks put the crypto exchanges’ deposits into an escrow account so as to separate the money from their other deposits that can be used to make loans or other investments.

“We just hold that money because of the extreme volatility of crypto trading,” said an official at one bank in Seoul. “We don’t pay interest and instead we don’t receive custody fees either.”

However, K bank, which is partnering with Upbit, uses the crypto exchange’s trading deposit to make investments in government bonds and make loans. The online-only lender is also paying interest to Upbit on the deposit.

When Upbit entered a partnership with K bank in June 2020, the digital lender was in desperate need of capital because its major shareholder, KT Corp, was under regulatory scrutiny and thus was not able to inject cash into it.

“Typically crypto exchanges have weaker bargaining power against banks because they need partner banks to provide real-name accounts in order to service Korean won-denominated trading,” an industry insider said. “But for K bank and Upbit, this was obviously not the case.”

The period of the partnership between K bank and Upbit is a business secret, but many believe their contract will be renewed every three years. “Financial authorities’ guidelines for crypto assets could become clearer when the two sides renegotiate the terms next year,” the industry insider said.

“There have been voices of criticism on K bank’s dealing with Upbit’s trading deposit, and the need for the improvement has become more pronounced after the LUNA crisis.” (Reporting by Choong-hee Won)