Commercial Banks and Internet Banks Hesitant to Expand... Is the Cryptocurrency Shutdown Becoming a Reality? (Comprehensive)

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 and Minwoo Lee] Following major commercial banks, internet-only banks have also decided not to issue real-name deposit and withdrawal accounts to cryptocurrency exchanges. This has triggered an emergency for exchanges that must secure real-name accounts to continue operations. Concerns are rising that after the September deadline for the grace period of the Act on Reporting and Using Specified Financial Transaction Information (the Special Financial Transactions Act), an estimated 200 cryptocurrency exchanges could be reduced to fewer than 10, resulting in widespread closures and investors facing losses becoming a reality.

According to financial sources on the 24th, KakaoBank, an internet-only bank, has internally decided not to enter into contracts to issue real-name accounts to cryptocurrency exchanges. A KakaoBank 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 currently provides real-name accounts to Upbit, also stated that there are no plans for additional partnerships. A K Bank representative explained, "We are continuing to issue real-name verified accounts to our current partner Upbit, but there are no plans for further partnerships."

Earlier, among the five major commercial banks, KB Kookmin Bank, Hana Bank, and Woori Bank 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 reportedly cautious about expanding real-name account issuance to other exchanges.

According to the amended Special Financial Transactions Act, which will be fully enforced starting in September, cryptocurrency exchanges must register with the Financial Intelligence Unit (FIU) under the Financial Services Commission and obtain deposit and withdrawal accounts that verify real names from banks to operate. Without receiving bank-issued real-name accounts, exchanges 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 growing calls for cryptocurrency investment regulation and the risk banks would have to share if unpredictable incidents such as system errors, hacking, or money laundering occur at exchanges.

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

If the refusal to open cryptocurrency exchange accounts spreads to regional banks, most domestic cryptocurrency exchanges are expected to close by the end of September. This increases the likelihood that Financial Services Commission Chairman Eun Sung-soo’s statement about the possible mass closure of cryptocurrency exchanges in September will become a reality.

As of this date, the domestic exchanges included in the CoinMarketCap ranking, which tracks global cryptocurrency market conditions (exchanges that support KRW 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. While deposit records can be verified against 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, 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, which is a major player 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.