The only funding channel in South Korea is CEX: TradFi is taking advantage of the bear market to comprehensively acquire cryptocurrency exchanges.

Written by: @xparadigms

Translated by: AididiaoJP, Foresight News

In Asia, the role of centralized exchanges (CEX) is completely different from that in the West. Retail traders rely more on exchanges rather than managing assets through non-custodial wallets. This dependence is most pronounced in South Korea—regulatory bodies strictly limit funding channels to only 5 licensed CEXs.

CEX is the only way for South Korean users to enter the crypto world

To exchange Korean Won for cryptocurrencies and back, one must go through a strictly controlled channel: the user’s CEX account must be linked to a bank account that has been verified with real-name authentication, and each exchange can only collaborate with a designated bank.

Since the Financial Supervisory Service (FSC) implemented real-name verification on January 30, 2018, top-ups and withdrawals can only occur between bank accounts and exchange accounts under the same bank. Third-party transfers are not allowed, anonymous virtual accounts are not permitted, and initially, foreigners and minors were also prohibited from participating.

All virtual asset service providers (VASP) must first register with the Korea Financial Intelligence Unit (KoFIU) before operating in South Korea. Registration itself requires obtaining the ISMS information security certification from the Korea Internet & Security Agency (KISA) and establishing a complete anti-money laundering (AML) system. However, even after clearing this stage, they can only engage in crypto-to-crypto trading.

To open a Korean Won market, they must also acquire a "real-name banking cooperation contract." Banks bear the compliance risks associated with these contracts, making them very cautious; thus, the vast majority of registered VASPs can still only conduct crypto-to-crypto trading. Ultimately, only 5 exchanges have simultaneously cleared the "VASP registration" and "real-name banking contract" thresholds to provide fiat-to-crypto exchange services. Each exchange is locked to a single cooperating bank.

Traditional finance is investing in CEX at the bottom of the cycle

For years, South Korean cryptocurrency exchanges and traditional financial institutions existed in two separate worlds, separated by the regulatory principle of "separation of finance and crypto" (금가분리). Although this principle has not been fully codified in law, financial authorities have strictly enforced it, effectively prohibiting banks and securities firms from engaging in crypto business.

In 2026, this line began to blur. Within about four months, three of South Korea's four largest exchanges introduced significant traditional financial shareholders one after another.

Now, exchanges are no longer viewed merely as transaction fee machines; they are seen as the entry point for customers and liquidity venues for the next phase of South Korean finance—this includes Korean Won stablecoins, custody services, and RWA products. For banks or securities firms, directly buying equity is the fastest way to secure VASP qualifications, existing user bases, and deep Korean Won liquidity, positioning themselves ahead of the full implementation of the Digital Asset Basic Act (DABA).

This competition is also a race against time. The FSC is expected to set the limit for a single major shareholder's stake in cryptocurrency exchanges at 20% under DABA (an agreement was reached on March 3, 2026). In the past four months, two significant transactions have occurred, and the key to watch in the second half of the year is whether the merger between Upbit and Naver Financial can ultimately be completed.

Case 1: Korbit and Mirae Asset, pioneers (February 2026)

South Korea's largest securities firm, Mirae Asset, acquired a 92.06% stake in Korbit for approximately $92 million, buying out shares held by NXC and SK Square, and announced plans to acquire another 5.42%, ultimately raising its stake to 97.15%. Korbit holds only about 1% market share; this transaction seems more like a bet on licensing, custody capabilities, and operational experience rather than trading volume.

Case 2: Upbit and Hana Financial, the largest and most symbolic transaction (May 2026)

Hana Financial Group agreed to purchase a 6.55% stake in Dunamu (the operator of Upbit) from Kakao Investment for approximately $667 million. This marks the first significant equity transaction between a traditional bank group in South Korea and a digital asset company.

Case 3: Coinone, OKX Ventures and Korea Investment & Securities (May 2026)

OKX Ventures and Korea Investment & Securities (KIS) each invested approximately $53 million to jointly acquire a 19.6% stake in Coinone, South Korea's third-largest exchange. The two sides intentionally split their stakes to avoid the anticipated 20% cap, while allowing the CEO to maintain management rights.

The crypto market has become too large to ignore

What traditional finance is truly buying is not the flow of transaction fees but the funding channels valued in Korean Won itself. In a market where only 5 licensed CEXs can convert Korean Won into cryptocurrencies, owning exchange equity equates to possessing a pipeline linking South Korean retail savings with digital assets.

From this perspective, the sluggish trading volume is almost irrelevant to acquirers—the value of a legally protected channel is structural rather than cyclical.

Acquisition is also the quickest way to 'get a license.' Banks or brokerages applying from scratch for VASP registration and obtaining real-name banking contracts typically require several years, with no guarantee that regulatory agencies or partnering banks will ultimately agree.

Moreover, the number of targets available for acquisition is dwindling. Korbit has already been taken, Coinone is currently under transaction, while Upbit and Bithumb are too large and may be limited to holding less than 20% under the anticipated DABA regulations. In light of this, it is foreseeable that the valuations of subsequent transactions may seem unreasonable based on fee metrics, but as a strategic option for the Korean Won funding channel, they are entirely rational.

Now, cryptocurrency has grown too significant for traditional financial firms to ignore.