The majority of cryptocurrency exchanges in South Korea are unable to use the new government-mandated system which was recently implemented. Six major banks have installed the real-name system, but only three have decided to offer the service to crypto exchanges. In addition, only the country’s top four exchanges receive this service from banks.
Four Exchanges Able to Use Real-Name System
It has been less than a week since the new real-name account system for South Korean cryptocurrency exchanges went into effect. From January 30, existing virtual accounts issued by banks for crypto exchanges must be converted into real-name accounts to deposit money to trade cryptocurrencies.
The regulators previously announced that 6 major banks have installed the real-name system: Shinhan Bank, Nonghyup Bank, Industrial Bank of Korea, KB Kookmin Bank, KEB Hana Bank, and Gwangju Bank. However, local media reported on Saturday that only the first three on the list have actually decided to provide real-name account service to cryptocurrency exchanges.
According to the Korean Blockchain Association, there are at least 25 cryptocurrency exchanges operating in the country. However, only Bithumb, Upbit, Coinone, and Korbit have had their virtual accounts converted into real-name ones, according to local media.
Citing that the rest of the exchanges “continue to ignore the guidelines of the real-name system,” Hankyung wrote:
The government encourages monopoly.
Service Optional For Banks
While the South Korean regulators ensured that the 6 banks installed the real-name system, banks are not mandated to provide service to cryptocurrency exchange customers.
Yonhap quoted a bank official saying, “Issuing new accounts confirmed to a virtual currency exchange is a voluntary decision by the bank.” The official further explained, “banks that have legal obligations related to the prevention of money laundering only check the internal control procedures such as customer confirmation of the virtual currency exchange and the system stability, customer protection device, and anti-money laundering procedures.” The news outlet elaborated:
The new account issuance is limited to exchanges with systems that are above the specified requirements, which means that if the conditions are not met, the new real-name verification account can be rejected.
Shinhan Bank, which services Bithumb, also made a decision to temporarily exclude the exchange from its real-name account issuance process, Asia Economic reported. A Shinhan Bank official explained that the bank “temporarily suspends the issuance of [Bithumb] accounts in consideration of the fact that they [Bithumb] are being investigated by the police.” On Friday, the police conducted an on-site investigation of Bithumb to find out who hacked the exchange last year.
787,600 Users Affected
The Korean Blockchain Association estimates that there are about 787,600 customers using small and medium-sized exchanges that do not have virtual accounts, Yonhap detailed. These exchanges use corporate accounts to keep customers funds, a practice that the regulators want to eliminate, citing the high risks of money laundering. The news outlet noted:
Currently, some exchanges that have not received their new accounts have confirmed that they will suspend transactions if the same situation persists after a certain period of time.
However, the publication pointed out that the regulators said it is possible to keep using corporate accounts, providing the exchanges can properly fulfill their anti-money laundering obligations as well as confirm the identity of customers. In addition, they will be “subject to intensive checks by banks and financial authorities.”
What do you think will happen to small crypto exchanges in South Korea? Let us know in the comments section below.
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