Financial Authorities Reject "Bankruptcy Discharge"... Cryptocurrency Exchanges Face Mass Closure Crisis

[Asia Economy Reporter Song Seung-seop] The situation for cryptocurrency exchanges required to obtain real-name accounts is expected to worsen further. This comes as financial authorities have rejected the banking sector's demand for 'exemption from liability in the exchange verification process.' Criticism is emerging that the responsibility for verification is being shifted to banks, and concerns are raised that a mass closure of exchanges is inevitable.

According to the financial sector on the 4th, financial authorities have effectively rejected the Korea Federation of Banks' request to establish exemption criteria. The Federation had requested the establishment of exemption standards on the grounds that banks should not be held responsible if no gross negligence is found on their part, even if money laundering incidents occur at cryptocurrency exchanges.

However, on the 1st, Eun Sung-soo, Chairman of the Financial Services Commission, appeared before the National Assembly's Political Affairs Committee and stated bluntly, "The primary responsibility for money laundering lies with the banks." He added, "If the bank believes it can handle it, then it accepts it; if not, it cannot. If you cannot even do that, you should not be in banking business." At the 'Sunshine Loan Bank Agreement Ceremony and Meeting' held that afternoon, he also asserted, "Would it be acceptable to grant exemption for terrorist financing? I hope no one even thinks about that."

Under the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Transactions Act), cryptocurrency exchanges must create deposit and withdrawal accounts verified with real names through banks by September 24. The banking sector is concerned that after issuing real-name accounts to exchanges, they may become embroiled in future financial accidents. There is also the possibility of controversy among investors who trusted banks that issued real-name accounts, claiming insufficient verification. Given the high anonymity of cryptocurrencies, if they become involved in money laundering, there is a significant risk of facing strong international regulations.

Due to the financial authorities' refusal to grant exemption, it is expected to become even more difficult for exchanges to obtain real-name bank accounts. So far, only four exchanges have secured real-name accounts. Shinhan Bank and Korbit, NH Nonghyup Bank and Coinone, K Bank and Upbit have formed partnerships to issue real-name accounts. Shinhan Bank and K Bank are currently conducting 'cryptocurrency exchange money laundering risk assessments' on the exchanges. Some predict that realistically, only these four exchanges will be able to secure real-name accounts.

As mass closures loom, dissatisfaction is erupting among exchanges, with complaints that "the authorities have stepped back and shifted responsibility to banks." Critics point out that the problem lies in making real-name account issuance conditional on private companies. From the perspective of private banks, there is no obligation to conduct verification work, so they have no reason to issue real-name accounts to exchanges while bearing the risk. Consequently, warnings are emerging that as many exchanges close, investors using these exchanges may suffer damages.

Concerns have also been raised in the National Assembly. Yoon Chang-hyun, a member of the National Assembly's Political Affairs Committee from the People Power Party, inquired in writing, "Is there a plan to issue warning signals to users regarding exchanges that have difficulty obtaining real-name verified accounts?" In response, the Financial Services Commission stated, "We believe it is necessary to provide sufficient information so that participants using unregistered expected cryptocurrency traders can withdraw or transfer virtual assets to registered operators before September 24," but added, "The specific schedule and scope of information provision will be reviewed through legal examination and consultations with relevant agencies."

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