State of Regulation in South Korea: Banks Required to Provide Fair Services to Crypto Exchanges

On October 30, South Korea's main financial authority officially cleared banks to work with crypto exchanges for the first time in history, establishing a major milestone for the local cryptocurrency sector.

At the state affairs audit, held by both government parties of South Korea to evaluate and track the progress of every government branch and agency under the administration of President Moon Jae-in, Financial Services Commission commissioner, Choi Jong-ku, stated that the FSC has cleared banks to work with cryptocurrency exchanges by providing virtual bank accounts.

Cryptocurrency investors in South Korea are not required to wait one to five days for deposits and withdrawals to clear, as they can safely store the South Korean won on exchanges by leveraging the security of local banks.

Commissioner Choi stated that banks and financial institutions are authorized to provide virtual bank accounts to cryptocurrency exchanges, given that the exchanges have strict Know Your Customer and Anti-Money Laundering systems in place that do not allow anonymous accounts and users to trade digital assets.

Virtual bank accounts in South Korea refer to replica accounts of bank holders, provided to third party platforms like cryptocurrency exchanges to allow instantaneous deposits and withdrawals.

The latest decision of the FSC to clear banks to cooperate with crypto exchanges represent the willingness of the government to legitimize the market, reflecting the government's previous plans released in July, to regulate cryptocurrency exchanges as proper financial institutions.

All of the major cryptocurrency exchanges in South Korea including Bithumb, Upbit, Coinone, and Korbit, the top four trading platforms in terms of daily trading volume, and every other minor cryptocurrency exchange will be entitled to fair banking service moving forward, as legitimate financial businesses.

Attorney Kim stated that the case is a historic achievement for the cryptocurrency sector, as it will establish a precedent in the long-term and will discourage banks from unilaterally refusing to provide services to digital asset exchanges.

For eight months, since January, Nonghyup also refused to provide services to Bithumb, which disallowed the largest exchange in South Korea from registering new users.

Overall, the cryptocurrency market of South Korea remains highly positive in regards to the decision of the FSC to allow banks to work with crypto exchanges and issue virtual bank accounts to trading platforms without the risk of unilateral termination of service.