South Korean regulators have announced a plan
to ban banks from activities involving
cryptocurrencies, prompting major banks in the
country to declare they will no longer issue
accounts required for crypto trading. South
Korea’s top bitcoin exchanges are all effected,
including Bithumb, Coinone, and Korbit. Banks
that have made announcements include Shinhan
Bank, Korea Development Bank, and Industrial
Bank of Korea.
Also read: South Korea Clarifies Position After
Reports of Possible Ban on All Crypto
Transactions
Crypto Ban Planned for Banks, Minors, and
Foreigners
The South Korean government has been holding
meetings daily to discuss cryptocurrency
regulation. On Wednesday, local publications
reported that the regulators are planning to ban
banks from activities involving cryptocurrencies.
According to AFP :
The Prime Minister’s Office said
Seoul would ban financial
institutions from dealing in virtual
currencies – including buying,
possessing, or holding them as
collateral.
In addition, Korea Herald reported that “banks in
Korea that provide virtual bank accounts for
cryptocurrency trades will have to verify the
identification of account holders when creating
new ones,” according to the plan. Furthermore,
the regulators plan to ban minors and foreigners
from both trading in cryptocurrency and creating
bank accounts in the country.
Virtual bank accounts are issued by traditional
banks for customers of cryptocurrency
exchanges. A customer wanting to start trading
at a crypto exchange must first open a virtual
bank account and deposit money into it. All
major Korean exchanges, including the country’s
largest bitcoin exchange Bithumb, require
customers to open virtual bank accounts before
trading. The Kyunghyang Shinmun described:
Virtual currency can be traded only
after joining a virtual currency
exchange and depositing money in
a virtual account assigned to the
exchange.
Banks Ditching Crypto Accounts
Wednesday’s announcement marks the first time
the regulators have applied restrictions on virtual
bank accounts.
The country’s major state-run and commercial
banks immediately responded by announcing that
they will stop issuing new virtual bank accounts
for cryptocurrency exchanges. Some are even
canceling existing accounts, Arirang News
reported, adding that:
Such measures will effectively
freeze most traders out of the
cryptocurrency market as the
country’s leading virtual currency
exchanges such as Bithumb and
Coinone require users to create a
virtual account before they can
conduct any transactions.
If a bank closes an exchange’s virtual bank
accounts, then “it is fundamentally impossible to
sell and buy virtual currencies through the bank,”
Business Korea noted.
Major Banks Jumping Ship
Among the banks that have decided to stop
issuing virtual accounts are Shinhan Bank, Korea
Development Bank (KDB), Industrial Bank Of
Korea (IBK), Woori Bank, KB Kookmin Bank, and
KEB Hana Bank.
Shinhan Bank, which issues virtual accounts for
Bithumb and Korbit, will not issue new virtual
accounts but will not cancel existing accounts,
according to the Kyunghyang Shinmun. In
November, news.Bitcoin.com reported on the
bank launching a cryptocurrency custody service.
The state-run KDB which issues virtual bank
accounts for Coinone announced that it will “stop
all the businesses related to cryptocurrency
transactions, including bitcoin, from January next
year,” Business Korea reported on Wednesday.
Woori Bank which issues virtual bank accounts
for Korbit is taking the same approach as KDB.
The bank will cancel existing virtual accounts as
well as suspend issuing new ones. IBK Bank , KB
Kookmin Bank , and KEB Hana Bank have all
stopped issuing virtual accounts.
At the time of writing, Nonghyup Bank has not
made an announcement regarding the matter.
According to the Investor publication, this bank
provides virtual account services to several
exchanges including Bithumb, Coinone, and
Korbit.