Author: Four Pillars, Pantera Capital

Translator: Yuliya, PANews

Editor’s Note: The "institutional custodian" (professionally known as Prime Brokerage, abbreviated as PB) in the cryptocurrency field is rapidly emerging globally. Although the South Korean market has not fully opened yet, everything is ready and just lacks the "regulatory" wind at its back. This article will explore what this billions-of-dollars market is all about and where the opportunities lie in Korea. Below is the translated original text:

Key Points

• What is a cryptocurrency prime broker? It is like a "super butler," bundling borrowing (financing), trading (execution), custody, clearing, and risk control of digital assets, providing a one-stop service for institutions.

• Market status: Although just starting out, it is developing rapidly. As institutional strategies become more complex and policies clearer, traditional financial giants are beginning to enter the market through acquisitions or partnerships.

• The four global schools converge: FalconX (originating from crypto trading and lending), Ripple Prime (crossing over from payment networks), Coinbase Prime (transitioning from an exchange to custody and trading), Cantor Fitzgerald (entering with traditional Wall Street’s massive funds).

• Current status in Korea: Korea currently does not have a complete cryptocurrency prime brokerage. According to existing regulations, lending, custody, trading, and clearing are governed by different laws, and companies are restricted in trading cryptocurrencies.

• Korea's potential: In fact, Korea has long been prepared with clients (demand), service providers (supply), and technology (infrastructure). As soon as policies are relaxed (such as allowing companies to trade, implementing the Digital Asset Basic Law (DABA), and approving spot ETFs), this market can swiftly operate.

This article is adapted from the jointly published report by Four Pillars and Pantera Capital, titled 2026 Korean Blockchain Guide for Institutions (the complete report also covers 14 other topics for companies and institutional investors).

1. Overview: The Rapid Rise of Cryptocurrency Prime Brokers

In traditional finance, prime brokers (PB) serve as versatile infrastructure. Wall Street financial titans just need to log into one platform to handle borrowing, trading, asset custody, clearing, and risk management. This "one-stop" service maximizes utilization of funds while securing better quotes. Nowadays, whether it's cryptocurrency exchanges, DeFi projects, or traditional financial institutions, they are all trying to replicate the "super butler" model established by Goldman Sachs, Morgan Stanley, and JPMorgan over recent decades.

Globally, traditional financial prime brokerage is a very mature and lucrative monopoly business. Leading players can earn between 35 billion to 40 billion dollars annually, with most hedge fund capital circulating through giants like Goldman Sachs and JPMorgan. Once established, client stickiness is extremely high: once a fund becomes accustomed to a certain "butler," the switching cost is very high, and the relationship deepens with various investment and financing services.

In contrast, while the "prime broker" market in the crypto space is still in its infancy, it is developing rapidly. Currently, the lending scale of institutions in the crypto space is around 35 billion dollars, which though lower than the peak period in 2022, shows a healthier foundation than before. The leading player in this field, FalconX, is nearing a valuation of 8 billion dollars and has processed over 1.5 trillion dollars in transactions by the end of 2023.

In April 2025, Ripple spent 1.25 billion dollars to acquire Hidden Road, marking the first acquisition in the space exceeding 100 million dollars, also hinting at future strategies: traditional financial giants are entering the crypto space brimming with capital through acquisitions or partnerships (for example, Cantor Fitzgerald, an established Wall Street institution, has initiated a 2 billion dollar bitcoin financing business, and Standard Chartered has integrated with FalconX). If the scale of the institutional market in the crypto space can catch up with traditional finance, this "butler" service alone could represent a multi-billion dollar business yearly. Whoever can capture this market will be able to define the "rules of the game" for institutional on-chain trading in the next decade.

Currently, three forces are driving this market forward:

• Complex strategies demand higher "capital efficiency": Institutional strategies in the crypto space are becoming increasingly advanced (such as basis trades, delta-neutral arbitrage, options overlays, and cross-platform market making). Distributing funds across different platforms like Binance, OKX, Deribit, and CME as collateral significantly hampers return rates. Providers like Maple have introduced over-collateralized lending solutions, replacing under-collateralized models, making "cross-collateral" more valuable: bundling all assets to assess risk capacity can amplify the same capital by 3 to 8 times in leverage.

• Clear policies encourage traditional finance to participate: With stablecoin legislation and improved regulatory attitudes post-2024, banks and brokerages finally have legal backing. The 2 billion dollar bitcoin business at Cantor Fitzgerald, the custody developments at BNY Mellon and State Street, and Fidelity's institutional expansion are all forerunners. It is expected that Goldman Sachs and JPMorgan will also launch complete cryptocurrency prime broker services within the next two to three years.

• On-chain DeFi technology is becoming more mature: Currently, whether it be credit (Maple, Centrifuge), trade execution (DEX aggregators, intent-based routing), custody (Anchorage, Fireblocks, Safe), or settlement (Copper ClearLoop, Zodia Interchange), there are specialized on-chain or near-chain providers for each. Through API interfaces and smart contracts, these services can be assembled like Legos, providing a seamless unified experience for fund managers or AI trading bots.

2. Global Trends: A Century-Long Fusion of Crypto and Traditional Finance

Case 1: FalconX

FalconX is currently the most authentic digital asset prime broker. As a CFTC-registered swap dealer, it not only provides excellent trading depth but can also lend money and offer token credit loans. It has processed over 2.5 trillion dollars in transactions, reportedly reaching a revenue of 75 million dollars by 2025. It serves over 600 asset management companies, hedge funds, family offices, and protocol treasuries, with its biggest selling point being "trade execution quality": through algorithms, it can help you find the best price across more than 30 counterparties and platforms at once. In 2025, it not only acquired the derivatives firm Arbelos Markets but also partnered with Standard Chartered to connect institutional banking networks across Asia, the Middle East, and the U.S., even securing Cantor Fitzgerald's bitcoin collateral loan limit. It can be said that FalconX is currently the platform most resembling traditional prime brokers, operating entirely on crypto networks, specifically serving crypto users, which is something that traditional financial enterprises have yet to achieve.

Case 2: Ripple Prime

In April 2025, Ripple invested 1.25 billion dollars to acquire Hidden Road, completing the first 100 million dollar acquisition in the crypto prime brokerage domain. (*Note: Hidden Road is a non-bank prime broker with a business spanning forex, precious metals, fixed income, and digital assets, and in 2024 helped clients transfer 30 trillion dollars in funds, backed by Citadel Securities, Castle Island Ventures, and Coinbase Ventures.) After the acquisition, Ripple launched Ripple Prime in November 2025, covering the clearing and trading of digital assets, forex, and derivatives, while using its own stablecoin RLUSD as collateral and utilizing the XRP ledger for settlement. Ripple Prime represents the evolution from crypto payments to prime brokerage: as an infrastructure company, it expands its institutional client base through acquisitions, embedding its stablecoin and payment network into the daily operation of mainstream finance. If this strategy is widely replicated, it will profoundly alter the competitive landscape for stablecoin issuers in targeting institutional clients.

Case 3: Coinbase Prime

Launched in 2018, Coinbase Prime is a typical model of an exchange directly acting as a "butler." It provides a suite of services including custody, trading, financing, and staking, regulated by U.S. authorities, for funds and asset management companies. Its advantages are clear: with certifications from the New York State Department of Financial Services (NYDFS) for custody, the strong financial backing of a public company, and high brand trust, it has become the preferred entry for traditional capital into the crypto space. In just the fourth quarter of 2024, Coinbase earned 141 million dollars from institutional trading, a spike of 156% from the previous quarter, and the queue of institutions wanting to enter continues to grow.

Coinbase Prime represents the evolution of "from exchange to prime broker": it does not start from scratch to build a prime broker but directly upgrades the existing custody and trading systems of the exchange into an institutional service layer. Kraken Prime, OKX, and OSL are also employing this strategy in their respective markets. This exchange-led prime broker model is likely to become a powerful tool for crypto exchanges to penetrate into traditional finance and compete for business with conventional brokerages.

Case 4: Cantor Fitzgerald

Cantor Fitzgerald represents a classic example of an established traditional finance enterprise expanding its existing prime brokerage business into the crypto space. Founded in 1945, it is a primary dealer for the Federal Reserve and a full-service investment bank, serving over 5,000 institutional clients, covering fixed income, equity, and multi-asset clearing. In July 2024, Cantor boldly announced the establishment of a dedicated bitcoin financing business, preparing 2 billion dollars for lending specifically to institutions holding bitcoin. By May 2025, this money started lending out, with Maple Finance and FalconX being the first clients to receive funds. For custody, Cantor partnered with Anchorage Digital (which has a U.S. federal bank charter) and Copper.co, perfectly combining traditional financial capital and execution capability with the compliance custody needed in the crypto space.

Subsequently, Cantor delved deeper into the crypto space: acquiring a 5% stake in Tether, launching a bitcoin fund backed by gold, and pursuing sponsorship of FalconX's public listing. Cantor exemplifies the "native extension of traditional finance": it does not seek to start from scratch but leverages its existing client relationships, regulatory licenses, and abundant capital to directly add a "bitcoin collateral financing" service to its existing prime brokerage offerings.

3. Opportunities in the Korean Market: All Is Ready Except for Regulation

Strictly speaking, Korea currently does not have such a "one-stop" cryptocurrency prime brokerage (PB). While there are companies specializing in custody, block trading, and exchanges, none can integrate lending, custody, and clearing into one service. This is due to Korea's Capital Markets Act, which stipulates that brokerage services can only operate in "securities"; the Specific Financial Transaction Information Reporting and Usage Act limits the functions of virtual asset service providers (VASPs) to custody, trading, and transfers; and generally, Korea does not allow companies to have real-name accounts for trading cryptocurrencies.

However, if you think the Korean market is a barren land, you are sorely mistaken. The "demand," "supply," and "infrastructure" necessary for prime brokerage have already been prepared; the only bottleneck is policy. Once "corporate participation in virtual assets' second phase" and the Digital Asset Basic Law (DABA) are implemented, Korea is likely to become the most favorable market, with existing companies immediately converting their established infrastructure into profitable services.

3.1 Demand Side: Corporate Second Phase Opens a Fund Pool for 3500 Clients

Korea's traditional PBS system was established in 2011 alongside the revision of the Capital Markets Act and the Korean version of hedge funds, mainly serving private equity funds engaged in short-selling and leveraged trading. Currently, only six capital-rich (over 30 trillion won) comprehensive financial investment companies operate in this field, with a contract scale of approximately 63 trillion won by the end of September 2025.

However, the crypto space is different: the Capital Markets Act does not allow private equity funds to buy cryptocurrencies, hence Korea lacks crypto hedge funds. Nevertheless, the client base for crypto PBs could be much broader. According to policies announced in February 2025, Korea will soon open its "second phase pilot," allowing about 2,500 listed companies and 1,000 affluent professional investment firms (with over 10 billion won in liquid assets) to participate. While U.S. PBs are supported by hedge funds, Korea's initial capital providers will be these real enterprises. Their demands are diverse:

• Digital Asset Management Companies (DAT): Companies like Paratexis Korea, attempting to incorporate Bitcoin onto their balance sheets by adopting the MicroStrategy model, represent the most direct demand. There may be a need for integrated infrastructure in this field, covering OTC brokerage for Bitcoin, custody, and asset management.

• BTC/ETH Spot ETF Issuers: The Korean government has clarified its intention to introduce domestic digital asset spot ETFs by January 2026. Issuing ETFs 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, this model will likely be replicated in Korea and could become the largest piece of the pie for Korean prime brokerages.

• Crypto VCs and Token Liquidity Providers (LP): Companies such as Nexon, Hashed, Wemade, and Com2uS Holdings hold a plethora of tokens that need to be unlocked for monetization and OTC trading. Due to domestic restrictions on corporate trading, they currently have to seek OTC desks abroad. In the future, whether they sell their issued tokens in batches, liquidate tokens from their VC portfolios, or use tokens as collateral for loans, these are services already offered by global crypto prime brokers, but no one in Korea is providing them yet.

• Affluent Professional Investment Firms: About 1,000 firms with substantial capital will be part of the second-phase opening. Many of them have experience in blockchain business or investing in derivatives, so they are more in need of collateralized trading and structured financial products rather than plain buying or selling of spot assets.

• Domestic Crypto Trading Firms: Local companies in Korea like Presto Labs and Hyperithm, engaged in quantitative trading and crypto asset management, are currently operating overseas due to restrictions on corporate self-directed trading. Whether they will return depends on how far corporate trading can be opened up and how tax policies will change.

3.2 Supply Side: Various Stakeholders Are Already Operating

In Korea, the four primary functions of PB (lending, credit expansion, custody, clearing) are governed by four different laws, making it challenging for a single company to handle all of them. (Lending falls under the Banking Act; securities lending and brokerage services are governed by the Capital Markets Act; virtual asset custody and trading are managed by the Specific Financial Transaction Information Reporting and Usage Act; while the obligations for user and exchange protection are specified in the Virtual Asset User Protection Act.) However, companies capable of performing these individual functions are already in place, and once policies allow, they can combine to provide prime brokerage services.

• Custody Companies: Globally, companies like Anchorage, BitGo, and Copper started with custody services before evolving into prime brokers. In Korea, custodial companies can easily extend their services to include OTC settlement, token asset management, and staking intermediaries. Once the corporate second phase opens up, the custody demand from listed companies buying Bitcoin as reserves will likely flow to them first.

• Commercial Banks: Directly engaging with cryptocurrencies is challenging for banks, and due to capital sufficiency rules, using cryptocurrencies as collateral is not very feasible. However, by investing in joint ventures focused on custody, banks have already established connections with institutional clients. They can provide peripheral support for crypto services: such as KRW settlements, foreign exchange and opening real-name accounts for companies.

• Securities Firms: Globally, brokers like Cantor Fitzgerald, and institutions like Jane Street and Virtu Financial, are actively involved in the crypto prime brokerage space. For Korean brokers, the most realistic path is to become authorized participants after the digital asset spot ETFs are listed or extend existing ETF prime brokerage services.

• KRW-based Exchanges: The model where exchanges like Coinbase Prime provide comprehensive institutional services will not work in Korea. Since Korean exchanges can only conduct trading and custody without self-directed trading, the key roles lie with local exchanges (such as Upbit and Bithumb) providing OTC trading, enterprise API interfaces, and liquidity specifically for institutions. After the first phase of corporate opening in 2025, they quickly launched exclusive services for institutions (Upbit Biz, Bithumb Biz) to preemptively seize the market.

• Global Crypto Prime Brokers: Firms like FalconX, Ripple Prime, Coinbase Prime, and Cantor Fitzgerald’s bitcoin financing service currently can only operate their Asian businesses from Singapore and Hong Kong. To enter Korea directly, these companies must obtain VASP registration. However, starting from the second half of 2024, the renewal review for licenses in Korea has dragged on, with stricter standards essentially blocking foreign companies from entering directly. The most pragmatic approach is to collaborate with local custodial institutions and brokerages.

3.3 With Regulatory Adjustments, Three Markets Will Open Sequentially

The infrastructure connecting supply and demand has also essentially been prepared. Banks and custody companies have built the groundwork, while various KRW exchanges have established OTC channels and APIs for institutional use. Even blockchain-based bond issuance and settlement pilots, spearheaded by institutions like Kyobo Life, are entering practical trading phases by 2026. The components required for the operation of Korean PB (demand foundation, supply entities, functional infrastructure) already exist. Adjusting regulatory levels will enable the remaining elements to coalesce into a market.

Regulatory adjustments will occur in three phases, with different markets opening at each phase:

• The second phase of corporate trading licenses is expected to be issued in the second half of 2026. This pilot will cover about 3,500 listed companies and professional investor entities, focusing on buyer OTC brokerage, custody, and treasury management services. Banks and custody companies can seize these opportunities for profits without needing to intersect with the Capital Markets Act.

• The Digital Asset Basic Law (DABA) expected to pass in 2027 is the second critical point. Once DABA is passed, industry rules will be established, clarifying who can engage in lending and custody. (This bill was not submitted on time by the end of 2025, primarily due to two contentious points: the requirement for stablecoin-issuing bank consortiums to hold 51% and the stockholding limits for exchange major shareholders.) If trading permissions are further relaxed for ordinary enterprises, the client base will far exceed 3,500.

• The approval of digital asset spot ETFs listed after 2027 is the third crucial milestone. The existing ETF market operates in a specific way and crypto ETFs are expected to follow suit. At that point, fund companies will issue ETFs, brokerages will handle market making, and custody will be through trusts or designated custodial institutions. Each listed ETF must appoint a new custodial institution, which will undoubtedly be the largest prime brokerage business that Korean custodial institutions can receive. Furthermore, as crypto-backed ETFs fit into the existing prime brokerage framework, it opens a pathway for securities firms to offer crypto prime brokerage services within the Capital Markets Act framework.

Throughout 2024 and 2025, the global crypto prime brokerage market has transformed into an infrastructure level suitable for institutions: Ripple acquired Hidden Road, Cantor Fitzgerald launched bitcoin financing, and FalconX's institutional trading volume reached 2.5 trillion dollars. Meanwhile, in Korea, demand, supply, and infrastructure are already in place. As regulation is gradually relaxed in phases from 2026 to 2027, the market will take shape step by step. The extent of territory that can be claimed will depend on the pace of regulatory advancement. However, it is certain that once policies are loosened, the business opportunities here will be substantial even on a global scale.

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