There are no compliance issues that should prevent South Korean banks from providing virtual bank accounts to cryptocurrency exchanges and business in the country, according to the finance minister, clarifying a legal grey area that has caused significant difficulties for exchanges in Korea.
Choi Jong-Ku, commissioner of the Financial Services Commission (FSC), said there were no particular issues that should prevent banks from servicing crypto clients, noting that as long as there were Know Your Customer (KYC) and anti-money laundering provisions in place, crypto platforms and banks should be able to seamlessly work together.
“There exists no issue in banks providing virtual bank accounts to cryptocurrency exchanges. If digital asset trading platforms have KYC and AML systems in place, there is no problem in issuing virtual bank accounts to exchanges,” Choi said.
The finance minister’s statement will be welcomed by crypto exchanges in the country, which make use of unique virtual bank accounts in order to handle local currency payments. These allow for instant deposits and withdrawals in South Korean won, and ensure currency can be held at exchanges.
Some mainstream commercial banks have been reluctant to work with Korean exchanges, with some having to stop accepting new deposits because they were searching for a banking partner to provide the necessary virtual accounts.
On the banking side, limited regulation and direction from lawmakers meant many were (and remain) unsure of working with businesses in the cryptocurrency sector.
From early 2018, tightening laws in South Korea saw banks become less willing to work with crypto exchanges, a position which felt for some time as if it was endorsed by the Korean government directly.
Issuing the clarifying statement on Wednesday, Choi said the government and financial regulators would no longer seek to make life difficult for crypto exchanges, and that in future, they should have no issues in reaching agreements with commercial banks.
The statement comes at a time of increasing activism from the South Korean government, as they attempt to clean up the cryptocurrency sector there. Following the high profile Bithumb attack, conditions for cryptocurrency businesses and investors in the country were tightened, as part of a package of measures designed to protect investors and consumers.
Just recently, the government has cleared a number of crypto exchanges as having “sufficient security standards” and management structures in place to deal with the threat of hacks and thefts.
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