[Inside Chodong] Conditions for the Coexistence of Traditional Finance and Virtual Assets

Following Mirae Asset, Hana Financial Joins Virtual Asset Alliance
Separation Principle Effectively Broken After Nine Years
Virtual Asset Risks Remain, Internal Control Capabilities Put to the Test
Authorities Must Also Clarify Their Stance

Hana Financial Group has secured a major shareholder position in Dunamu through Hana Bank. This was made possible by acquiring a 6.55% stake, valued at 1 trillion won, in cash from Kakao Investment. It is unusual for a commercial bank to invest in a stake in a different industry. In particular, it is unprecedented for a bank to spend over 1 trillion won to purchase shares in the operator of Korea’s largest virtual asset exchange. Industry insiders are describing this move as both bold and unexpected.

Hana Financial Group has made its intention to pivot towards future finance clear by forming a strategic alliance with Dunamu. This is, in effect, a declaration that the group will not remain within the confines of traditional financial services such as banking, securities, and credit cards, but will recognize and take the lead in the ecosystem shift towards Korean won-based stablecoins and, further, Web3 finance. The decision may also have been influenced by the view that Hana's banking and securities operations are relatively less competitive compared to rival financial holding companies. This aligns with Chairman Ham Young-joo’s management philosophy that “if you are smaller and weaker, you must move more nimbly and diligently than others.”

Chairman Ham Young-joo of Hana Financial Group (right) and Vice Chairman Kim Hyung-nyeon of Dunamu are shaking hands.

There is both tension and concern within the industry. The immediate benefit is the expected increase in liquidity as deposits from Upbit, operated by Dunamu, flow in. Industry watchers are focusing on the likelihood that, when Upbit’s KRW deposit and withdrawal real-name account partnership with K Bank expires this October, Hana Bank may take over. As of the end of last year, Upbit’s deposit balance stood at 5.833 trillion won, indicating the potential for a significant influx of funds. At the same time, there is a sense of envy regarding the near-exclusive partnership with Dunamu, the top player in the virtual asset sector.

This decision is also significant in that it effectively breaks the principle of separation between traditional finance and the virtual asset market, a principle that has been maintained since 2017. Back then, when the coin market was rapidly expanding, financial regulators essentially prohibited traditional financial institutions from holding, purchasing, or investing in virtual assets, and this policy remains in place today. The rationale was to prevent the risks inherent in the highly speculative virtual asset market from spreading to the traditional financial market, which prioritizes depositor protection. The reason that interactions between traditional financial institutions and the virtual asset sector had been limited to simple partnerships, such as real-name deposit and withdrawal accounts, was also due to this principle of separation. However, with the digital transformation of finance now a global trend, the time has come to recognize the coexistence of traditional finance and virtual assets.

Nevertheless, concerns remain regarding internal controls within the virtual asset market. Recent incidents, such as the erroneous Bitcoin payment at Bithumb and a hacking incident at Upbit, are still fresh in our memory. The participation of a traditional bank as a shareholder means that it will also have to share some responsibility for financial security incidents. The continued decline in Hana Financial Group’s stock price following the announcement of the Dunamu stake acquisition reflects these concerns. Ultimately, for coexistence to succeed, it is essential to align risk management standards as well as to cooperate on future finance.

Financial regulators, who created the so-called “shadow regulation” of separation between traditional finance and virtual assets, must also clarify their stance. Given the acquisition of Korbit by Mirae Asset Group and Hana Financial Group’s decision to invest in Dunamu, it is likely that there was some level of communication with the authorities. However, as long as regulations remain in force, it will not be easy for this trend to gain momentum. Until now, traditional financial holding companies have been hesitant to actively implement future finance initiatives, partly due to concerns about regulatory scrutiny. Nevertheless, financial regulators have yet to clearly propose even a government bill on the Digital Asset Basic Act. The coexistence of traditional finance and virtual assets has already begun. It is imperative not to further delay the clarification of which aspects of virtual assets will be permitted and where regulation will begin.

This content was produced with the assistance of AI translation services.