By Nam Hyun-woo
Korean banks’ plan to introduce a real-name registration system for renewing cryptocurrency trading for 3.5 million investors is feared to trigger massive turmoil this week.
The new guideline set by the financial regulator is part of moves to chill the country’s overheated digital token craze and combat illegalities that might occur in cryptocurrency trading, such as money laundering.
Under the guideline, traders have to use bank accounts opened at the same bank their cryptocurrency exchange uses.
For example, those using Coinone exchange need accounts at NongHyup Bank. Bithumb is under contract with NongHyup and Shinhan banks, while UPbit has its accounts at Industrial Bank of Korea.
Through the measure, banks can check whether cryptocurrency investments come from a bank account owned by the same individual.
As the authority bans anonymity in crypto-trading, existing traders will have to go through an identification process, and those who seek to newly invest in virtual coins will have greater difficulties opening accounts.
For those who have accounts at the same bank their exchange uses, exchanges will provide online authentication. For example, Bithumb will require traders with resident registration number, bank account number and other information that can authenticate them.
However, a huge turmoil is expected during the process for those who don’t have accounts at the same bank.
Banks have already said they will not allow new accounts for cryptocurrency trading, following the government’s blatant pressure on them to comply with the authority.
The financial authority and commercial banks are throwing the ball into each other’s court regarding possible fallout from the scheme.
The Financial Services Commission (FSC) maintains a position that it is up to banks whether to issue a new trading account for cryptocurrencies after they introduce a real-name service system, but banks will be held responsible for any problems.
FSC Vice Chairman Kim Yong-beom recently said, “The FSC wants banks to comply with the announced guideline. We will keep an eye on them.”
Coming under the apparent pressure, six major banks having real-name account systems for cryptocurrency trading said they will not allow new accounts for clients who state their purpose of opening is for cryptocurrency trading.
Since 2014, banks have placed a cap on the amount of transactions from an account unless the purpose of the account is clearly stated. For example, accounts opened through non-face-to-face channels -- one of the ways of dodging questions on the purpose of the account -- will have a 300,000 won ($280) cap on online transactions or withdrawal from ATMs in a single day.
Banks are already in preparation for bracing for the impact of the measure.
“Not only explosive growth in the number of inquiries, but also an increase in the requests for opening accounts through non-face-to-face channels is expected,” a bank official said.
Korea is home to some of the world’s largest digital coin exchanges, with the number of subscribers to major exchanges exceeding 3.5 million.
Apparently, the domestic crypto-trading scene is rattled by the government’s tough stance. Earlier this month, the price of bitcoin was hovering over 27 million won at Bithumb, but was trading around 13 million won as of 5 p.m. Sunday.