South Korea: Illegal for any bank to refuse services to cryptocurrency exchanges

South Korea: Illegal for any bank to refuse services to cryptocurrency exchanges

Financial Services Commission (FSC) of South Korea Mr Choi Jong-Ku stated in reports that there are no compliance issues that should prevent a commercial bank from providing virtual bank accounts to local cryptocurrency exchanges, a local court has ruled against a local bank that denied banking services to a local cryptocurrency exchange.

Recently the commissioner of the Financial Services Commission (FSC) of South Korea Mr Choi Jong-Ku stated in reports that there are no compliance issues that should prevent a commercial bank from providing virtual bank accounts to local cryptocurrency exchanges, a local court has ruled against a local bank that denied banking services to a local cryptocurrency exchange.

The Nonghyup bank tried to cease offering withdrawal and deposit services to Coins crypto exchange, this was ruled over by Central District Court’s 50th Civil Affairs Division saying the decision and action by the bank were illegal and unfair.

The bank had argued that it stopped the services to the exchange to follow the anti-money laundering guidelines issued by the regulator Financial Services Commission (FSC).

The Nonghyup bank was among the three of the banks that the Financial Services Commissions visited earlier this year for a check to ensure that they were following the Know-Your-Client and Anti-Money Laundering rules, the other two were Hana Bank and Kookmin Bank.

Many other banks like Korea Development Bank, Industrial Bank of Korea, Shinhan Bank, Kookmin Bank and Woori Bank were also being suspected of speculative trading and money laundering by the commission. After these inspections by the commission, an alert was raised because of growing suspicion that cryptocurrencies were being used in the illegal operations.

The Nonghyup bank also refused to renew the contract with Bithumb cryptocurrency exchange three months ago, stating that the cryptocurrency exchange was not strict and had “problems in protecting consumers and information and preventing money laundering.” This event followed a hack at Bithumb which led to losses of US$30 million stolen from a hot wallet.

The users, with the help of a virtual bank account, are able to deposit and withdraw South Korean won instantly and hold it on or remove it from cryptocurrency exchanges for trading or exchange with other tokens. But the government also had encouraged banks earlier this year to avoid working with exchanges to eliminate the possibility of money laundering using digital assets.

The new rules also comes after several checks, initiatives, leadership and action from the financial services commission such as coming up with a regulation that guides the use of cryptocurrency under AML and other regulations.

According to the report by Choi, any local cryptocurrency that follows Know Your Customer (KYC) and Anti-Money Laundering (AML) systems will be able to obtain banking services from the commercial financial institutions without any restrictions.

The commission has also approved a number of exchanges including Bithumb, Upbit, Gopax, Korbit, Coinone and reports that these exchanges have sufficient security measures and internal management systems

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