Commercial and Internet Banks Decide Not to Issue Real-Name Accounts for Cryptocurrency Exchanges... Reality of Mass Closures

Internet Banks Also Not Considering Additional Partnerships
Commercial Banks Hesitant to Issue Real-Name Accounts

On the 24th, when Bitcoin sharply dropped to the 40 million won range, the coin prices were displayed on the Bithumb electronic board in Gangnam-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporters Kiho Sung, Minwoo Lee] Following major commercial banks, internet-only banks have also decided not to issue real-name deposit and withdrawal accounts to cryptocurrency exchanges. As a result, it is feared that after the expiration of the grace period for the enforcement of the Act on Reporting and Using Specified Financial Transaction Information in September, up to 200 estimated cryptocurrency exchanges will be reduced to fewer than 10 through mass closures, causing investor losses to become a reality.

According to the financial sector on the 24th, Kakao Bank, an internet-only bank, has internally decided not to enter into contracts to issue real-name accounts to cryptocurrency exchanges. A Kakao Bank official stated, "We are not considering partnerships with cryptocurrency exchanges at all, nor are we reviewing the issuance of real-name accounts." K Bank, which provides real-name accounts to Upbit, also stated that there will be no additional partnerships. A K Bank representative explained, "We are continuing to issue real-name verification accounts for our current partner Upbit, but there are no plans for additional partnerships."

Among the five major commercial banks, KB Kookmin Bank, Hana Bank, and Woori Bank have decided not to enter into contracts to issue real-name accounts to cryptocurrency exchanges. Shinhan Bank and NH Nonghyup Bank, which have partnerships with Korbit and Bithumb respectively, are considering suspending these partnerships.

According to the amended Specified Financial Transaction Information Act, which will be fully enforced from September, cryptocurrency exchanges must obtain deposit and withdrawal accounts with real-name verification from banks to report to the Financial Intelligence Unit (FIU) under the Financial Services Commission in order to operate. Without obtaining a bank-issued real-name account, they will not be able to conduct business.

However, banks, which hold the power over the survival of cryptocurrency exchanges, have settled on refusing to issue real-name accounts. This decision is influenced by the growing calls for cryptocurrency investment regulation and the risk banks would have to share in the event of unpredictable incidents such as system errors, hacking, or money laundering at exchanges.

A financial holding company official said, "It is not easy to form partnerships with cryptocurrency exchanges when the financial authorities view them unfavorably," adding, "The common perspective in the financial sector is to avoid risks rather than pursue profitability."

If banks refuse to issue real-name accounts, the cryptocurrency investment market will inevitably shrink. This is why Financial Services Commission Chairman Eun Sung-soo’s assertion that "mass closures of cryptocurrency exchanges are possible in September" is becoming increasingly likely.

As of this date, the domestic exchanges included in the CoinMarketCap ranking of global cryptocurrency markets (exchanges that support Korean won trading) are limited to 14, including Bithumb, Coinone, Korbit, Upbit, and Huobi Korea. Currently, only four exchanges?Upbit, Bithumb, Coinone, and Korbit?use real-name accounts. The remaining exchanges operate using a "beehive account" system, where investors deposit funds into bank accounts opened under the exchange’s name without real-name verification. While deposit records can be verified through the exchange’s account, investors must trust the exchange for subsequent cryptocurrency transaction records. Due to insufficient real-name verification procedures, there is a possibility that these accounts have been used for money laundering. Moreover, the beehive account ledgers exist in simple file formats such as Excel, so in the event of hacking or other incidents, funds may be mixed, making compensation for victims uncertain.

Above all, there are concerns about the impact on the 2030 generation, who are major players in this market. Although exact figures have not been disclosed, it is estimated that the 2030 generation accounts for more than 50% of the entire cryptocurrency market. Youngsoo Seo, a researcher at Kiwoom Securities, warned, "Financial accidents among young people caused by cryptocurrency volatility could potentially lead to financial institution insolvencies."

This content was produced with the assistance of AI translation services.