South Korea have reportedly requested not to be held responsible for crimes related to cryptocurrencies, such as money laundering. According to local media, financial regulators are developing rules that could relieve Korean banks from liability as they scrutinize the crypto exchanges they work with.
New guidelines to ease South Korean banks
The Korea Herald wrote on Sunday that Korean banks are reluctant to open real-name accounts for traders on local cryptocurrency exchanges. The reasons lie in recently adopted regulations forcing trading platforms to partner with local financial institutions. Few have done so, fearing that banks could be held liable for money laundering, fraud, and other crimes related to cryptocurrency transactions.
The Financial Services Commission (FSC), South Korea’s main financial regulator, is considering issuing specific guidelines that could ease some of the burden on banks. The Korean newspaper quoted an unnamed government official. He detailed that the guidelines could come in the form of “letters of inaction” in which members of the government can state that they do not recommend legal action against banks should the aforementioned problems arise.
According to the official, the final decision on the matter is expected by the end of next month. The report shows that regulators are aware of the concerns raised by financial institutions. Banks now risk being held liable for failing to detect potential fraud or money laundering activities when issuing real-name accounts. Implementation of relevant guidelines that protect them from such risks could ease the concerns of Korean banks and open them up to crypto service providers.
Banks and exchanges stuck on real-name account problem
Changes to the Reporting and Use of Certain Financial Transaction Information Act, enacted in March, require Korean crypto exchanges to partner with local commercial banks, whose users must be created real-name accounts by September 24. As the Hana banking group, it has decided to stay away from the sector for now.
Only the four largest trading platforms Upbit, Bithumb, Coinone and Korbit managed to find a banking partner. Online K Bank currently opens real-name accounts for Upbit, Shinhan Bank works with Korbit, and NH Nonghyup Bank provides services to Bithumb and Coinone.
At the same time, hundreds of smaller exchanges are under threat of being banned from withdrawing funds for trading cryptocurrencies if they fail to partner with a Korean bank by September. FSC Chairman Eun Sung-soo warned in April that all 200 of South Korea’s platforms could be shut down.
A number of Korean exchanges have begun delisting some “high-risk” coins and placing others on alert lists in preparation for the upcoming stricter rules for crypto-related transactions in the country. The delisting stance, which increases market volatility, is also seen as a move to appease Korean banks.