By Kim Yoo-chul
Top financial authorities said Sunday that they won’t prevent local banks from issuing new virtual accounts to investors as Korea has no plans to “kill” crypto-trading.
“Worries are high that latest measures on crypto-trading for local banks to comply with know your customer and anti-money laundering obligations were aimed at closely monitoring all cryptocurrency transactions between banks and crypto exchanges. This is not true. We have no plans to kill crypto-trading,” said an official at the Financial Supervisory Service (FSS).
The regulatory body said it has “never tried” to block moves by local banks wanting to open new virtual accounts for investors since a set of new trading rules became effective in January.
Korea allowed the trade in cryptocurrencies for those with real-name bank accounts beginning Jan. 30. The government has said such measures were aimed at “cooling down the crypto transactions craze, and preventing it from being exploited for illegal activities such as tax evasion and money laundering.”
The guidelines managed to win public support and investment confidence. But there is growing concern that regulators have gone too far. Critics cite cases in other industries like heavy taxes on multiple-home owners and a ban on gambling for Koreans.
Less than 4 percent out of an estimated 3 million crypto traders in the country opened new cryptocurrency transaction accounts which were in place in banks through partnership with crypto exchanges.
“We thought the numbers who wanted to get new virtual accounts would have reached up to 1.8 million. That’s quite disappointing. The crypto trading market is highly emotional and things are taken from a small thing and expanded into something large. The implementation of new rules is still sending mixed signals to the markets,” said an official at the Industrial Bank of Korea, which allows its customers to trade virtual currencies on the Upbit platform.
An earlier police search of Bithumb, one of the country’s top cryptocurrency exchanges over the mismanagement of its customer information also chilled investor sentiment regarding the trade of crypto-assets complying with the new rules, said officials.
“The FSS is worrying over the sudden downsides of crypto-trading because of the implementation of those rules. By letting banks handle the real-name cryptocurrency identification service, the regulator wants to make sure that investors are doing things that are above board,” said another government official.
During bitcoin’s bull run into December last year, Korean exchanges were trading it at prices nearly 50 percent higher than most exchanges around the world. This led to Coinmarketcap to remove some Korean exchanges due to “the extreme divergence in prices from the rest of the world and limited arbitrage opportunity.”
But last week’s new slump to lows back in the $8,000 range has completely rearranged the market, and Korean bitcoin exchange rates are now level with the rest of the world for the first time in almost six weeks.
On a related note, Finance Minister Kim Dong-yeon said Cheong Wa Dae will announce the country’s updated plans for cryptocurrency trading by the end of this month.
“I don’t think I am the right person to announce the government’s updated stance regarding an issue of shutting down cryptocurrency exchanges,” Kim said in a meeting with Korean reporters in Beijing, China, Feb. 2.
More than 200,000 Koreans filed a petition on a message board operated by the presidential office asking for the government to sack Justice Minister Park Sang-ki after he said the ministry was preparing a bill to shut down cryptocurrency exchanges.