Prime Brokerages: Regulation Is the Only Barrier to Entry in Korea

Key Takeaways

• Crypto prime brokerage is emerging as an integrated institutional infrastructure layer that combines financing, execution, custody, clearing, and risk management for digital assets.
• The market is still early, but it is growing quickly as institutional crypto strategies become more complex, regulatory clarity improves, and traditional financial institutions begin entering through acquisitions and partnerships.
• Global models are converging from different starting points: FalconX from crypto-native execution and financing, Ripple Prime from payments infrastructure, Coinbase Prime from exchange-based custody and trading, and Cantor Fitzgerald from traditional finance balance sheet capacity.
• Korea does not yet have a full crypto prime brokerage market because lending, custody, trading, and clearing are split across different regulatory regimes, and corporate crypto participation remains restricted.
• However, Korea already has the demand base, supply-side players, and infrastructure for crypto PB; the market can begin forming as corporate trading access, DABA, and spot digital asset ETFs are introduced.

This article is adapted from "Korean Blockchain Guidebook for Institutions 2026," jointly published by Four Pillars and Pantera Capital. The full report covers 14 more themes for companies and institutional investors.

1. Overview: The Rapid Rise of Crypto Prime Brokerage

A prime brokerage in traditional finance is a unified infrastructure layer, enabling sophisticated institutional investors to secure financing, execution, custody, clearing and risk audits all in a single platform. The consolidation of services in a prime brokerage enables economies of scale in capital efficiency, access to inventory and products, and counterparty management. As crypto exchanges, DeFi protocols, and TradFi players all continue to expand crypto services across the entire stack of trading and financial services, all of these players are converging upon the prime brokerage model, recreating the integrated architecture that Goldman, Morgan Stanley, and JPMorgan scaled over the last few decades.

Globally, prime brokerage is a mature, concentrated business. Revenues across the top-tier TradFi PBs run in the range of $35-40 billion annually, with the bulge bracket — Goldman Sachs, Morgan Stanley, JPMorgan — capturing the majority of hedge fund flow. The asset base under PB relationships exceeds $4 trillion, and the business is structurally sticky: once a fund integrates operationally with a PB, switching costs are non-trivial, and the relationship tends to deepen over time through cap intro, research access, and financing accommodation.

The crypto prime brokerage market, by contrast, is nascent but compounding rapidly. Institutional crypto lending outstanding sits at roughly $35 billion across DeFi and CeFi, still a fraction of its 2022 peak but rebuilding on healthier foundations. FalconX, the category leader, is valued near $8 billion and processed over $1.5 trillion in cumulative volume by end of 2023. Ripple's $1.25 billion acquisition of Hidden Road in April 2025 marked the first nine-figure consolidation in the space, and signals what the next phase looks like: TradFi-scale balance sheets flowing into crypto-native infrastructure, either through acquisition or partnership (Cantor Fitzgerald's $2 billion Bitcoin financing business, Standard Chartered's FalconX integration). If crypto institutional markets converge even partially with TradFi scale, the PB layer alone represents a multi-billion-dollar annual revenue opportunity — and the firms that win will set the rails for how institutional capital transacts on-chain for the next decade.

Three forces are driving convergence towards the prime brokerage simultaneously:

• Capital efficiency matters for complex strategies - as institutional crypto strategies grow more sophisticated (basis trades, delta-neutral arbitrage, options overlays, cross-venue market making), fragmented collateral posting across Binance, OKX, Deribit, and CME becomes a direct drag on returns. Overcollateralized lending from providers like Maple has replaced the undercollateralized model, but this makes cross-margining even more economically valuable: the PB primitive of netting collateral against portfolio-level risk is the difference between 3x and 8x effective leverage on the same equity base.
• Regulatory clarity unlocks TradFi balance sheets - Stablecoin legislation, progress on market structure, and the post-2024 regulatory posture have given banks and broker-dealers legal cover to extend into digital assets. Cantor Fitzgerald's $2 billion Bitcoin financing business, BNY Mellon and State Street's custody buildouts, and Fidelity's institutional expansion are leading indicators, with Goldman, JPMorgan, and Morgan Stanley expected to launch full crypto PBs within two to three years.
• Onchain DeFi is expanding its footprint across the PB stack - Credit (Maple, Centrifuge), execution (DEX aggregators, intent-based routing), custody (Anchorage, Fireblocks, Safe), and settlement (Copper ClearLoop, Zodia Interchange) now have specialized onchain or onchain-adjacent providers interoperating through APIs and smart contracts. This is a structurally different equilibrium than TradFi's monolithic relationship model, and the precondition for an agent-native orchestration layer that presents the composed stack as a unified experience to human fund managers and autonomous AI agents alike.

2. Global Trends: Bridging Crypto and Traditional Finance

Case Study 1: FalconX

FalconX represents a full-spectrum digital asset prime broker, offering deep liquidity provisioning, financing, execution, and token structured-credit facilities as a CFTC-registered swap dealer. The company has processed over $2.5 trillion USD in transaction volume, and reportedly reached $75 million USD in revenue for 2025. Its institutional client base includes 600+ asset managers, hedge funds, family offices, and protocol treasuries. FalconX's core differentiator is execution quality: aggregating liquidity across more than 30 counterparties and venues with algorithmic best-execution routing. Over 2025, FalconX acquired derivatives firm Arbelos Markets, partnered with Standard Chartered to integrate institutional banking rails across Asia, the Middle East, and the U.S., and secured a Bitcoin-collateralized credit facility from Cantor Fitzgerald. FalconX represents the closest analog to a traditional prime brokerage venue, built natively on crypto rails and for a crypto-native audience that TradFi incumbents cannot yet match.

Case Study 2: Ripple Prime

Ripple acquired Hidden Road in April 2025 for $1.25 billion, closing the first nine-figure crypto prime brokerage consolidation and integrating a multi-asset non-bank prime that had facilitated $3 trillion in fund transfers in 2024. Founded in 2018 by Marc Asch, Hidden Road had scaled into a cross-asset PB covering foreign exchange, precious metals, fixed income, and digital assets, with backing from Citadel Securities, Castle Island Ventures, and Coinbase Ventures. Following the acquisition's close, Ripple launched Ripple Prime in the U.S. market in November 2025, unifying clearing, financing, and execution across digital assets, FX, derivatives, and fixed income, with RLUSD integrated as collateral and the XRP Ledger targeted for settlement efficiency gains. Ripple Prime represents the crypto-payments-to-prime-brokerage evolution: an infrastructure company using a prime brokerage acquisition to deepen institutional distribution and extend its stablecoin and settlement rails into the mainstream capital markets workflow — a playbook that, if widely replicated, would reshape how stablecoin issuers compete for institutional mindshare.

Case Study 3: Coinbase Prime

Coinbase Prime is the exchange-native prime brokerage, launched in 2018 and offering integrated U.S.-regulated custody, trading, financing, and staking for funds and asset managers. Its positioning is distinctive: NYDFS-qualified custody, a public-company balance sheet, and the brand trust that has made it the default entry point for TradFi allocators entering digital assets. Coinbase earned $141 million in institutional transaction revenue in Q4 2024 alone, a 156% quarter-over-quarter increase, and has flagged sustained growth in its institutional onboarding pipeline. Coinbase Prime represents the exchange-to-prime evolution: rather than building prime brokerage as a standalone business, a vertically integrated exchange uses its existing custody and execution infrastructure as the foundation for an institutional service layer — a model also pursued by Kraken Prime, OKX, and OSL in their respective jurisdictions. This exchange-native PB playbook could become also a method through which crypto exchanges reach a wider TradFi audience and begin to compete with traditional brokerage incumbents.

Case Study 4: Cantor Fitzgerald

Cantor Fitzgerald is the most direct example of a TradFi incumbent extending its existing prime brokerage franchise into digital assets. Founded in 1945, Cantor is a Federal Reserve primary dealer and full-service investment bank serving over 5,000 institutional clients, with a prime services business spanning fixed income, equities, and multi-asset clearing. In July 2024, Cantor announced a dedicated Bitcoin Financing Business with $2 billion in initial capacity to provide leverage to institutional Bitcoin holders, and in May 2025 the business executed its first transactions — with Maple Finance and FalconX as the first recipients of credit from the facility. Cantor partnered with Anchorage Digital (which has a US federal bank charter) and Copper.co for custody, building a stack that combines TradFi balance sheet and execution with crypto-native qualified custody infrastructure.

The firm has since deepened its digital asset footprint across a 5% stake in Tether, a Gold-Protected Bitcoin Fund, and pitches for the FalconX IPO mandate. Cantor represents the TradFi-native extension archetype: rather than building new, an incumbent PB with existing client relationships, regulatory licenses, and balance sheet depth layers Bitcoin-collateralized financing on top of its current prime services stack.

3. Opportunities in the Korean Market: Demand, Supply, and Infrastructure Already Exist

At present, no crypto prime brokerage (PB) exists in Korea in the formal sense. Operators performing individual functions such as custody, OTC brokerage, and domestic exchange activity are in place, but no single entity bundles lending, credit extension, custody, and clearing into a unified PB offering. The Capital Markets Act limits dedicated brokerage services to "securities" and excludes cryptocurrencies; the Act on Reporting and Use of Certain Financial Transaction Information (Specified Financial Information Act) restricts Virtual Asset Service Providers (VASPs) to custody management, exchange, and transfer; and corporate real-name account issuance is, in principle, blocked.

Diagnosing the Korean market as empty, however, misses the point. The demand layer, the supply layer, and the infrastructure layer needed for a PB to function are each already in place. What is blocked is regulation. Once Phase 2 of the corporate roadmap for virtual asset market participation and the Digital Asset Basic Act (DABA) take effect in sequence, Korea could become the market best positioned for existing operators to turn already-built infrastructure into services.

3.1 Demand Side: A Pool of 3,500 Customers Opened by Corporate Phase 2

Korea's PBS regime was set up alongside the September 2011 amendment to the Capital Markets Act and the launch of the Korean-style hedge fund framework. Six comprehensive financial investment business operators (jongtusa) with equity capital of 3 trillion won or more conduct dedicated brokerage services, and PBS contract value reached roughly 63 trillion won as of the end of September 2025. Traditional PB mostly serves private equity funds running securities short-selling and leverage strategies, and Korea built its PBS regime on that equation.

Crypto PB does not inherit the same equation. Under the Capital Markets Act, private funds cannot hold cryptocurrencies as underlying assets, so crypto hedge funds simply do not exist in Korea. Instead, the nature of cryptocurrencies widens the crypto PB customer base compared with traditional PB, and demand arrives through channels other than hedge funds.

According to the Roadmap for Corporate Participation in the Virtual Asset Market announced by the Financial Services Commission in February 2025, Phase 2 pilot eligibility covers about 2,500 listed companies and roughly 1,000 corporations registered as professional investors with financial investment product balances of 10 billion won or more (5 billion won for externally audited corporations). Unlike the United States, which built crypto PB demand on hedge funds, the first customer segments to open under Korean law are corporate: listed companies and professional-investor corporations. This demand is not uniform, and the PB functions each segment needs likely differ:

• Digital Asset Treasury (DAT) Companies: Korean DAT companies following the MicroStrategy model and adding BTC to their balance sheets form demand most directly. Paratexis Korea's attempted BTC treasury conversion is a leading signal. This segment will likely need integrated infrastructure covering OTC brokerage for BTC purchases, custody, and treasury management.
• BTC/ETH Spot ETF Issuers: In its January 2026 Economic Policy Direction, the government officially specified the introduction of domestic digital asset spot ETFs. ETF issuers need PB-level infrastructure to secure Authorized Participant (AP) functions, custody contracts, and OTC liquidity. The structure in which BlackRock's IBIT and Fidelity's FBTC rely on Coinbase Prime in the United States will likely replicate in Korea, and as a single PB demand source, this segment could produce the largest scale.
• Crypto VCs and Token LPs: Nexon, Hashed, Wemade, Com2uS Holdings and others hold token portfolios with vesting unlock and OTC sale demand, and currently route orders through overseas OTC desks because of restrictions on cryptocurrency trading by domestic corporations. Phased liquidation of self-issued tokens, partial sale of VC portfolios, and token-collateralized liquidity are all areas global crypto PBs already absorb, but remain uncovered in Korea.
• Professional Investor Registered Corporations: Roughly 1,000 corporations with financial investment product balances of 10 billion won or more (5 billion won for externally audited corporations) fall under Phase 2. Many have blockchain-related business lines or derivatives investment experience, so demand skews toward collateralized transactions and structured products rather than straight spot trading.
• Domestic Crypto Trading Firms: Domestic players running quantitative trading and crypto asset management, such as Presto Labs and Hyperithm, operate mainly out of overseas corporate bases because of restrictions on proprietary crypto trading by Korean corporations. Whether they return home depends on the scope of permitted corporate trading and the pace of tax reform.

3.2 Supply Side: Operators Already Exist at Each Layer

In Korea, the core functions of crypto PB sit across four statutes: the Banking Act, the Capital Markets Act, the Specified Financial Information Act, and the Virtual Asset User Protection Act. Lending belongs to banks licensed under the Banking Act; securities lending and dedicated brokerage services to jongtusa under the Capital Markets Act; custody and exchange of virtual assets to VASPs reported under the Specified Financial Information Act. The Virtual Asset User Protection Act, in force since 2024, separately governs user protection and exchange obligations. Because of this split, the four PB functions (lending, credit extension, custody, and clearing) are hard to integrate inside a single legal entity. The layers of operators that could split the functions are, however, already in place, and once regulation is adjusted, combinations across those layers could turn into PB services.

• Custody Providers: Globally, Anchorage, BitGo, and Copper all started in custody and expanded into prime brokerage. Domestically, operators with custody capability have room to extend into PB-adjacent functions such as OTC settlement, token portfolio management, and staking intermediation. When corporate Phase 2 begins, this is the first point where listed-company treasury BTC custody demand will concentrate.
• Commercial Banks: Banks cannot easily handle cryptocurrencies directly, and receiving crypto spot collateral faces real constraints under capital adequacy rules. They have, however, secured institutional client touchpoints through equity stakes in custody joint ventures, and can supply the peripheral functions of crypto services: won settlement, foreign exchange, and corporate real-name account issuance.
• Securities Firms: Globally, securities firms active in crypto PB include broker-dealers like Cantor Fitzgerald, alongside Jane Street and Virtu Financial, which act as APs and market makers for BTC ETFs. For Korean securities firms, the PB-relevant paths are the AP role once digital asset spot ETFs list, and extensions of existing ETF prime services.
• Won-based Exchanges: Globally, Coinbase Prime shows a vertically integrated model where the exchange owns the institutional stack. That path does not work in Korea, where exchange business is limited to exchange and custody management and proprietary trading is blocked. But institutional-only OTC execution, corporate API connectivity, and liquidity provision are required pieces of any working crypto PB stack, and here won-based exchanges slot in as a core layer. Upbit and Bithumb sequentially rolled out institutional-only services (Upbit Biz, Bithumb Biz) after corporate Phase 1 permission in 2025, a move to lock in this position early.
• Global Crypto PBs: FalconX, Ripple Prime, Coinbase Prime, and Cantor Fitzgerald's Bitcoin Financing run their Asia operations out of Singapore and Hong Kong, and direct entry into Korea requires VASP registration acceptance as a precondition. Since the second half of 2024, FIU VASP renewal reviews have stretched beyond a year and review standards have effectively tightened, so direct entry by new foreign operators is practically closed. The realistic route is partnership with domestic custodians and securities firms.

3.3 Three Markets That Open in Line with Regulatory Adjustment

The infrastructure layer connecting demand and supply is also mostly live. Custody joint ventures have secured institutional custody capacity together with banks, and corporate-facing OTC channels and institutional-only APIs have been built by each won-based exchange. Blockchain-based bond issuance and settlement pilots entered the actual transaction stage in 2026, led by institutions including Kyobo Life. The pieces Korea needs for a PB to function (the demand base, the supply entities, the functional infrastructure) are already present. Adjust the regulatory layer and the rest will combine into a market.

Regulatory adjustment happens at three points in sequence, and the market that opens at each point differs:

• Phase 2 corporate trading permission, expected in the second half of 2026, is the first point. Roughly 3,500 listed companies and professional-investor corporations fall under the pilot, and the markets that open here are purchase-side OTC brokerage, custody, and treasury management services. The bank-custody bilateral structure can run without touching the Capital Markets Act.
• Passage of the Digital Asset Basic Act (DABA), expected in 2027, is the second point. In December 2025, the government bill failed to reach the National Assembly within the year, and the two flashpoints delaying legislation are the Bank of Korea's proposed 51% ownership rule for bank consortiums issuing stablecoins and the cap on exchange major shareholder ownership. Once DABA passes and industry categories settle, the operator categories that can host each PB function (lending, credit extension, custody, clearing) will become explicit, and if trading permission extends to general corporations, the PB customer pool expands well past the 3,500-company Phase 2 figure.
• Digital asset spot ETF listings, estimated for 2027 and beyond, is the third point. The AP, market-making, and lending structures already running in the existing ETF market transfer directly to crypto ETFs, and custody outsourcing demand arises at scale at the issuer level. Asset managers issue the ETFs, securities firms take AP and LP roles, and custody is delegated to trust operators or designated custody providers. Because a new custodian must be designated for each listed ETF, this is likely the single largest PB demand source for Korean custody providers. And as crypto-underlying ETFs fold into the existing PBS framework, this is also the point at which a route opens inside the Capital Markets Act for securities firms to offer crypto-related PB services.

Through 2024 and 2025, the global crypto PB market crossed into full-scale institutional infrastructure: Ripple's acquisition of Hidden Road, Cantor Fitzgerald's launch of BTC Financing, and FalconX's 2.5 trillion dollars in cumulative institutional trading volume. In Korea, demand, supply, and infrastructure already exist, and because regulatory adjustment arrives in stages, markets will likely form in sequence from Phase 2 in 2026 through DABA in 2027 and on to digital asset spot ETFs. Where each participant can lock in position depends on how fast regulation moves, and the business opportunity after adjustment is sizable even by global standards.