South Korea’s financial watchdog on Tuesday unveiled a set of guidelines to employ a real-name transaction system for virtual coins encrypted on distributed ledger platforms like blockchain, starting Jan. 30.
Once the new real-name transaction system comes into effect, cryptocurrency traders will be able to resume the purchase of encrypted coins like bitcoin, ether or ripple in Korea.
Traders in Korea have faced hurdles in depositing money to buy more coins since the government in December halted banks from issuing anonymous accounts -- previously a means to coin transactions.
Under the incoming system, a buyer of cryptocurrency coins is only allowed to make money transactions between a personal account with the holder’s identification verified and a corporate account held by a cryptocurrency exchange. The two accounts must be issued from the same bank to allow coin investors to deposit and withdraw money. If the accounts are from different banks, the investors cannot make a deposit.
Financial Services Commission Vice Chairman Kim Yong-beom (center) speaks at a press conference in Seoul on Tuesday. (Yonhap)
These and other guidelines are expected to curb coin speculation and illegal activities involving cryptocurrency, Kim Yong-beom, vice chairman of the Financial Services Commission, said in a press briefing.
Six banks -- Nonghyup Bank, Shinhan Bank, KEB Hana Bank, KB Kookmin Bank, the Industrial Bank of Korea and Gwangju Bank -- are preparing to launch the real-name transaction systems en bloc.
Major cryptocurrency exchanges like Bithumb, Coinone and Korbit are reconsidering at which banks to open corporate bank accounts. They said discussions underway cannot be disclosed.
The new real-name system will take the place of a cryptocurrency trading system through unverifiable virtual bank accounts. Coin investors were previously able to deposit money through non-real-name accounts attached to a corporate account by the exchange.
The Seoul government has been moving to tighten control of the cryptocurrency market, citing rampant criminalities involved in the trade.
Criminal cases include an exchange’s resale of virtual accounts to another exchange; an exchange holding a business license as an online retailer; embezzlement by employees or major shareholders at an exchange; and investment in virtual coins using a corporate bank account.
The FSC added that financial authorities have even received reports that money to buy drugs came through an exchange, while an unauthorized fundraiser collected money from investors to buy cryptocurrency miners or invest in cryptocurrencies.
Despite such cases, banks “haven’t come up with measures to handle the cases and have failed to report cases of dubious transactions,” Kim said.
The FSC also said that the latest measures are aimed at preventing money laundering.
Financial firms should monitor local cryptocurrency exchanges on whether they keep assets at a high security standard and detect and report money laundering in cryptocurrency transactions, the watchdog said.
The banks are also obliged to report cases to an intelligence unit affiliated to the FSC when a trader is suspected of laundering money, including if a trader makes a transaction in coins worth more than 10 million won ($9,300) in a day or 20 million won in a week.
Banks are additionally authorized to reject transactions with virtual currency exchanges if the exchanges refuse to provide information on users to banks or adopt the system to verify the identity of account holders.
Kim of the FSC said the information of cryptocurrency traders will be shared through a pool provided by the Korea Federation of Banks, starting in February.
The measures followed an inspection of six banks -- Nonghyup Bank, Shinhan Bank, Woori Bank, KB Kookmin Bank, the Industrial Bank of Korea and the Korea Development Bank -- conducted by the FSC’s intelligence unit and the Financial Supervisory Service between Jan. 8 and Jan. 16. The FSC said none of the cases were sent to police or prosecutors.
Prior to the announcement, Prime Minister Lee Nak-yon said in a Cabinet meeting Tuesday that civil servants must be held to a higher standard by revising the civil servants’ code of conduct.
“Virtual currencies are still outside the legal boundary, but we are conducting an investigation on the personnel because a civil servant must be obliged to follow a higher standard of work ethics,” he said.
South Korea unveiled on Dec. 28 measures to curb the speculation of cryptocurrencies, while gesturing at a future all-out ban on coin trade here.
By Son Ji-hyoung (firstname.lastname@example.org