Authors: Four Pillars , Pantera Capital

Compiled by: Yuliya, PANews

Editor's Note: Institutional brokers (PBs) are rapidly emerging globally in the cryptocurrency space. While the South Korean market isn't fully open yet, it's ready except for the crucial regulatory boost. This article will examine this multi-billion dollar market and explore the opportunities in South Korea. Below is a translated version of the original text:

Key points

What is a crypto prime broker? It's like a "super manager" that packages all aspects of digital assets, including borrowing (financing), buying and selling (execution), safekeeping (custody), settlement (clearing), and risk control, providing a one-stop service for institutions.
Market Status: Although still in its early stages, the market is developing rapidly. This is because institutional strategies are becoming increasingly complex, policies are becoming clearer, and traditional financial giants are also rushing into the market through acquisitions or partnerships.
The four major schools of thought in the world have converged on the same goal: FalconX (which started with trading and lending native to the cryptocurrency world), Ripple Prime (which crossed over from payment networks), Coinbase Prime (which transformed from an exchange to custody and trading), and Cantor Fitzgerald (which entered the market with huge amounts of money from traditional Wall Street).
The current situation in South Korea: South Korea currently lacks a complete crypto prime brokerage firm. This is because, under current regulations, lending, custody, trading, and clearing are governed by different laws, and corporate cryptocurrency trading is also restricted.
South Korea's potential: In fact, South Korea has already prepared customers (demand), service providers (supply), and technology (infrastructure). As soon as the policy door opens (such as allowing corporate trading, enacting the Digital Asset Basic Law (DABA), and approving spot ETFs), this market can start operating immediately.

This article is adapted from the “ 2026 Institutional Korea Blockchain Guide ” published by Four Pillars and Pantera Capital (the full report also covers 14 other topics for corporate and institutional investors).

1. Overview: The rapid rise of crypto prime brokers

In traditional finance, prime brokers (PBs) are an all-encompassing infrastructure. Wall Street's financial giants only need to log into a single platform to handle borrowing, trading, asset custody, clearing, and risk control. This "one-stop" service maximizes capital utilization and secures better quotes. Now, crypto exchanges, DeFi projects, and traditional financial institutions are all trying to replicate this "super-concierge" model that Goldman Sachs, Morgan Stanley, and JPMorgan Chase built over the past few decades in the cryptocurrency space.

Globally, prime brokerage in traditional finance is a highly mature and profitable monopoly. Top players can earn between $35 billion and $40 billion annually, with most hedge fund money circulating among giants like Goldman Sachs and JPMorgan Chase. Once this business is established, client loyalty is extremely high: once a fund becomes accustomed to a particular "manager," the cost of switching is too high, and the relationship between the two parties grows stronger with the various investment and financing services offered.

In contrast, the cryptocurrency prime brokerage market, while still in its early stages, is developing rapidly. Currently, institutional lending in the cryptocurrency space is approximately $35 billion, which, while not reaching the peak of 2022, is much healthier. The industry leader, FalconX, is valued at nearly $8 billion and had processed over $1.5 trillion in transactions by the end of 2023.

In April 2025, Ripple acquired Hidden Road for $1.25 billion, marking the first time a merger exceeding $100 million had occurred in the industry. This also hinted at future trends: traditional financial giants are entering the cryptocurrency space with massive amounts of capital through acquisitions or partnerships (for example, Wall Street veteran Cantor Fitzgerald conducted a $2 billion Bitcoin fundraising business, and Standard Chartered Bank integrated with FalconX). If the size of the institutional market in the cryptocurrency space can even slightly match that of traditional finance, this "concierge" service alone could be a multi-billion dollar business annually. Whoever controls this market will set the "rules of the game" for institutional on-chain transactions over the next decade.

There are currently three forces driving this market forward:

Complex strategies require higher "capital efficiency": Institutional players in the crypto space are employing increasingly sophisticated tactics (such as basis trading, Delta-neutral arbitrage, options stacking, and cross-platform market making). Spreading funds across different platforms like Binance, OKX, Deribit, and CME as margin significantly hinders returns. Providers like Maple have replaced under-collateralized lending, but this makes "cross-margining" even more valuable: bundling all assets together to calculate risk allowances can leverage the same principal by 3 to 8 times.
Policy clarity has emboldened traditional financial institutions: with stablecoin legislation and a more favorable regulatory stance after 2024, banks and brokerages finally have legal protection. Cantor Fitzgerald's $2 billion Bitcoin business, the custody initiatives of Bank of New York Mellon and State Street, and Fidelity's institutional expansion are all pioneers. It is expected that established players like Goldman Sachs and JPMorgan Chase will also launch full-fledged crypto prime brokerage services within two to three years.
On-chain DeFi technology is becoming increasingly mature: now, whether it's lending (Maple, Centrifuge), trade execution (DEX aggregators, intent-based routing), custody (Anchorage, Fireblocks, Safe), or settlement (Copper ClearLoop, Zodia Interchange), there are highly professional on-chain or near-chain providers. Through API interfaces and smart contracts, these services can be assembled like Lego bricks, providing fund managers or AI trading bots with a smooth and unified experience.

2. Global Trend: The Century-Long Integration of Cryptocurrency and Traditional Finance

Case 1: FalconX

FalconX is currently the purest prime brokerage for digital assets. As a CFTC-registered swap dealer, it not only offers excellent trading depth but also provides lending and token credit. It has processed over $2.5 trillion in transactions and reportedly generated $75 million in revenue in 2025. It serves over 600 asset management firms, hedge funds, family offices, and protocol vaults. Its biggest selling point is "trade execution quality": through algorithms, it can simultaneously find the best price for you across more than 30 counterparties and platforms. In 2025, it not only acquired derivatives company Arbelos Markets but also partnered with Standard Chartered Bank to expand its institutional banking network across Asia, the Middle East, and the United States, and even secured a Bitcoin-backed loan from Cantor Fitzgerald. In short, FalconX is currently the platform most similar to a traditional prime brokerage, and it's entirely built on the crypto network, specifically serving users in the crypto space—something traditional financial institutions haven't yet achieved.

Case 2: Ripple Prime

In April 2025, Ripple acquired Hidden Road for $1.25 billion, completing the first acquisition of a crypto prime brokerage firm worth over $100 million. (*Note: Hidden Road is a non-bank prime brokerage firm with operations spanning forex, precious metals, fixed income, and digital assets. In 2024, it helped clients transfer $3 trillion in funds and is backed by Citadel Securities, Castle Island Ventures, and Coinbase Ventures.) Following the acquisition, Ripple launched Ripple Prime in November 2025, encompassing clearing and trading of digital assets, forex, and derivatives, and using its own stablecoin RLUSD as collateral for settlement on the XRP ledger. Ripple Prime represents an evolution from crypto payments to prime brokerage: as an infrastructure company, it expands its institutional client base through acquisitions and then integrates its stablecoin and payment network into the daily operations of mainstream finance. If this strategy is widely replicated, the way stablecoin issuers compete for institutional clients will be completely transformed.

Case 3: Coinbase Prime

Launched in 2018, Coinbase Prime is a prime example of an exchange acting as its own "custodian." It provides funds and asset management companies with a comprehensive, US-regulated service encompassing custody, trading, financing, and staking. Its advantages are clear: New York Department of Financial Services (NYDFS) certified custody, the financial strength of a publicly traded company, and extremely high brand trust, making it the preferred entry point for traditional funds into the cryptocurrency space. In the fourth quarter of 2024 alone, Coinbase earned $141 million from institutional trading, a staggering 156% increase from the previous quarter, and the number of institutions queuing to join continues to grow.

Coinbase Prime represents an evolution "from exchange to prime broker": instead of building a prime broker from scratch, it directly upgrades the exchange's existing custody and trading systems into an institutional service layer. Kraken Prime, OKX, and OSL are also using this approach in their respective territories. This prime broker model integrated into exchanges could very well become a powerful tool for crypto exchanges to penetrate the traditional financial sector and begin competing with traditional brokerages.

Case 4: Cantor Fitzgerald

Cantor Fitzgerald is a classic example of a traditional financial institution expanding its prime brokerage business into the crypto space. Founded in 1945, the company is a primary dealer to the Federal Reserve and a full-service investment bank serving over 5,000 institutional clients across fixed income, equities, and multi-asset clearing. In July 2024, Cantor announced the launch of a dedicated Bitcoin funding business, with an initial $2 billion allocation specifically for lending to institutions holding Bitcoin. In May 2025, this funding began being disbursed, with Maple Finance and FalconX becoming the first clients to receive the funds. For custody, Cantor partnered with Anchorage Digital (a U.S. federal banking license holder) and Copper.co. This perfectly combined the capital and execution capabilities of traditional finance with the professional, compliant custody services of the crypto space.

Afterward, Cantor deepened its presence in the crypto world: it acquired a 5% stake in Tether, established a gold-protected Bitcoin fund, and is currently seeking to sponsor FalconX's IPO. Cantor represents a typical example of "native expansion of traditional finance": instead of starting from scratch, it leverages its existing customer relationships, regulatory licenses, and substantial capital to directly add a "Bitcoin collateralized financing" business to its existing prime brokerage services.

3. Opportunities in the South Korean market: Everything is ready except for regulation.

Strictly speaking, South Korea currently does not have a "one-stop" crypto prime broker (PB). While there are firms specializing in custody, block trading, and exchanges, none can integrate lending, custody, and clearing all at once. This is because South Korea's Capital Markets Act stipulates that brokerage services can only handle "securities"; the Specific Financial Transaction Information Reporting and Use Act (Specific Financial Information Act) limits the functions of Virtual Asset Service Providers (VASPs) to custody management, trading, and transfers; and, in principle, South Korea does not allow companies to open registered accounts for cryptocurrency trading.

But if you think the South Korean market is a wasteland, you're sorely mistaken. The "demand side," "supply side," and "infrastructure" needed for prime brokerage are all in place; the only bottleneck is policy. Once the "Phase Two of Corporate Participation in Virtual Assets" and the Digital Assets Basic Law (DABA) are implemented, South Korea is likely to become the market with the best conditions, allowing existing companies to immediately turn the established infrastructure into profitable services.

3.1 Demand side: In the second phase, the company opened up a capital pool for 3,500 customers.

South Korea's traditional PBS (Short Selling and Investing) system was established in 2011 along with the revision of the Capital Markets Act and the introduction of the Korean version of hedge funds. It primarily serves private equity funds that engage in short selling and leveraged trading. Currently, only six well-capitalized (over 3 trillion won) integrated financial investment companies are engaged in this business, and the contract size is estimated at approximately 63 trillion won by the end of September 2025.

However, the cryptocurrency market is different. South Korea's Capital Markets Act prohibits private equity funds from buying cryptocurrencies, so there are no cryptocurrency hedge funds in South Korea. However, cryptocurrency prime brokers (PBs) actually have a broader client base. According to a policy announced in February 2025, South Korea will soon open a "second phase pilot," allowing approximately 2,500 listed companies and 1,000 well-funded professional investment firms (with over 10 billion won in their accounts) to participate. While US prime brokers are supported by hedge funds, South Korea's first wave of investors will be these established companies. Their needs are diverse:

Digital Asset Management Companies (DATs): South Korean DAT companies adopting the MicroStrategy model and incorporating Bitcoin into their balance sheets represent the most direct demand. Paratexis Korea's attempt to convert its asset management business to Bitcoin is a significant signal. This sector may require integrated infrastructure encompassing Bitcoin over-the-counter brokerage, custody, and asset management.
The South Korean government has clearly stated its intention to introduce a domestic digital asset spot ETF in January 2026. Issuing an ETF requires prime broker-level infrastructure to handle subscriptions, redemptions, asset custody, and liquidity. Just as BlackRock's IBIT and Fidelity's FBTC rely on Coinbase Prime in the US, this model will likely be replicated in South Korea. This could become the biggest slice of the pie for South Korean prime brokers.
Crypto VCs and Token Liquidity Providers (LPs): Companies like Nexon, Hashed, Wemade, and Com2uS Holdings hold a large number of tokens that need to be unlocked, liquidated, and traded over-the-counter (OTC). Because of domestic restrictions on cryptocurrency trading, they currently have to look to overseas OTC exchanges. In the future, whether it's selling their own tokens in batches, selling tokens from venture capital portfolios, or using tokens as collateral for loans, these are all businesses that global crypto prime brokers are already doing, but no one in South Korea is doing yet.
Well-funded professional investment firms: Approximately 1,000 companies with substantial cash reserves are eligible for the second phase of the program. Many of them have experience in blockchain businesses or investing in derivatives, so they are more in need of collateralized trading and structured financial products than simply buying and selling spot goods.
Domestic cryptocurrency trading companies : South Korean companies like Presto Labs and Hyperithm, which specialize in quantitative trading and cryptocurrency asset management, are currently operating overseas because China prohibits companies from trading cryptocurrencies on their own. Whether they will return to South Korea depends on the extent to which corporate trading is liberalized and how tax policies change.

3.2 Supply side: There are people working at every stage.

In South Korea, the four main functions of prime brokerage (PB) – lending, credit expansion, custody, and clearing – are governed by four different laws, making it difficult for a single company to handle them all. (Lending is governed by the Banking Act; securities lending and brokerage services are governed by the Capital Markets Act; custody and trading of virtual assets are governed by the Act on Reporting and Use of Specific Financial Transaction Information; and the obligation to protect users and exchanges is governed by the Virtual Asset User Protection Act.) However, companies capable of handling these individual aspects are already in place, and given the policy allowance, they can combine to create a prime brokerage service.

Custody companies: Globally, Anchorage, BitGo, and Copper all started as custody firms before becoming prime brokers. In South Korea, companies with custody capabilities can easily extend their business to over-the-counter settlement, token asset management, and staking intermediaries. Once businesses reopen in Phase Two, the custody demand from listed companies buying Bitcoin as reserves will first flood their markets.
Commercial banks: It's difficult for banks to directly engage with cryptocurrencies, and using cryptocurrencies as collateral is also impractical due to capital adequacy regulations. However, banks have already established connections with institutional clients through investments in custody joint ventures. They can provide peripheral support for crypto services, such as Korean won settlement, foreign exchange, and opening registered accounts for businesses.
Securities firms: Globally, brokerages like Cantor Fitzgerald, as well as institutions like Jane Street and Virtu Financial that make markets for Bitcoin ETFs, are very active in the crypto prime brokerage sector. For South Korean brokerages, the most reliable approach is to become authorized participants after digital asset spot ETFs are listed, or to extend their existing ETF prime brokerage services.
Exchanges based in South Korea : The model of exchanges like Coinbase Prime, which handle all institutional services themselves, is not feasible in South Korea. This is because South Korean exchanges can only conduct trading and custody, not proprietary trading. However, dedicated over-the-counter trading, enterprise API interfaces, and liquidity provision are essential for any crypto prime broker. In this regard, South Korean exchanges (such as Upbit and Bithumb) are a core force. After the first phase of enterprise access was opened in 2025, they quickly launched dedicated institutional services (Upbit Biz, Bithumb Biz) to secure their position early.
Global crypto prime brokers like FalconX, Ripple Prime, Coinbase Prime, and Cantor Fitzgerald currently only operate their Bitcoin funding businesses in Asia, primarily in Singapore and Hong Kong. Direct entry into South Korea requires obtaining a VASP registration license. However, since the second half of 2024, license renewal reviews in South Korea have become extremely lengthy, and standards have become stricter, essentially blocking direct entry for foreign companies. The most practical solution is to partner with local South Korean custody institutions and brokerages.

3.3 With regulatory adjustments, the three markets will be opened sequentially.

The infrastructure connecting supply and demand is also largely ready. Banks and custody companies have set up the platform, and various Korean won exchanges have established over-the-counter trading channels for businesses and application programming interfaces (APIs) for institutional use only. Even the blockchain-based bond issuance and settlement pilot program, spearheaded by institutions such as Kyobo Life, entered the actual trading phase in 2026. The necessary components for the operation of Korean prime brokerages (PB) – demand base, supply entities, and functional infrastructure – already exist. With adjustments to the regulatory framework, the remaining components will be combined into a single market.

The regulatory adjustments will be carried out in three phases, with different markets being opened in each phase:

The second phase of corporate transaction licenses is expected to be issued in the second half of 2026. Approximately 3,500 listed companies and professional investor corporations are included in this pilot program, which opens up markets for buy-side OTC brokerage, custody, and treasury management services. Banks and custodian companies can profit from this without violating the Capital Markets Act.
The second key point is the Digital Assets Basic Law (DABA), expected to be passed in 2027. Once DABA is passed, industry rules will be established, clearly defining who can engage in lending and who can provide custody services. (This bill was delayed until the end of 2025 mainly due to two controversial points: the Bank of Korea's requirement that bank consortia issuing stablecoins must hold 51% of the shares, and the issue of shareholding caps for major shareholders of exchanges.) If trading rights are further liberalized to ordinary enterprises, the customer base will far exceed 3,500 companies.
The approval and listing of digital asset spot ETFs is expected to be the third key milestone in 2027 and beyond. Crypto ETFs will operate in the same way as the existing ETF market. Fund companies will issue ETFs, securities firms will act as market makers, and custody will be handled by trusts or designated custodians. Since each listed ETF must appoint a new custodian, this will undoubtedly be the largest prime brokerage business that Korean custodians can receive. Furthermore, with ETFs based on cryptocurrencies being included in the existing prime brokerage framework, this also opens a pathway for securities companies to provide crypto prime brokerage services within the framework of the Capital Markets Act.

Throughout 2024 and 2025, the global crypto prime brokerage market has transformed into institutional-grade infrastructure: Ripple acquired Hidden Road, Cantor Fitzgerald launched a Bitcoin funding round, and FalconX's institutional trading volume reached $2.5 trillion. In South Korea, demand, supply, and infrastructure are already in place. As regulations are gradually relaxed between 2026 and 2027, the market will take shape step by step. How much market share each player can gain depends entirely on the speed of regulatory progress. But one thing is certain: once policies are relaxed, the business opportunities here will be enormous, even on a global scale.

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