Kimchi Premium? Major Korean bank FOMOs into crypto custody
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The fourth-largest bank in the home of the fabled Kimchi Premium – South Korea’s Woori Financial Group – has become the latest institutional player to dip a toe in crypto, forming a joint-ventured digital asset custody service.
The bank joins three other South Korean giants on the institutional crypto custody bandwagon – KB Kookmin Bank, Nonghyup Bank and Shinhan Bank – which have all established similar services in the past seven to eight months.
Woori is no small fish, with more than US$311 billion in assets under management, according to Statista.
The bank has teamed with South Korean blockchain company Coinplug and the joint venture will be called D-Custody.
As reported by Coindesk Korea, the new service will give the bank’s clients exposure to assets such as Bitcoin and Ethereum, as well as NFTs and DeFi products.
Given the surging popularity of cryptocurrency in South Korea, D-Custody will no doubt aim to ape the success of prominent US custodians such as Gemini and Grayscale.
Despite recent regulatory crackdowns on its cryptocurrency exchanges, South Korea is still considered one of the most rabidly active crypto markets in the world.
From time to time, Korea’s enthusiastic crypto activity has seen the price of Bitcoin inflate on local exchanges compared with global counterparts. It’s a phenomenon known as the Kimchi Premium, which skilful traders have used to capitalise on in a big way through means of arbitrage.
According to Forbes, the Kimchi Premium is partly how 29-year-old crypto billionaire Sam Bankman-Fried, the owner of the popular US exchange FTX, skyrocketed his wealth.
The premium has been known to reach as high as a 50% BTC price disparity. Apart from the odd spike, however, it has generally been fluctuating at much lower levels this year, and at times has been non-existent.
This is, in part, due to an ever-tightening crypto regulatory framework being rolled out in South Korea, with the government strengthening its guidelines on overseas crypto transactions.
Keen arbitragers, though, will still be watching to see if the premium flares up again if/when frothy market conditions return to the broader crypto landscape.