Banks distancing from cryptocurrency... 'Money laundering' emerges as the biggest variable

NongHyup Bank Temporarily Demands Bithumb and Coinone Suspend Coin Deposits and Withdrawals
Seeks Safeguards Amid Money Laundering Liability Concerns
Expected Impact on Real-Name Account Certification Renewal

[Asia Economy Reporter Kim Jin-ho] With the deadline for reporting under the Act on Reporting and Using Specified Financial Transaction Information (the Specified Financial Information Act) just over two months away, a shift in sentiment is being detected between major commercial banks and cryptocurrency exchanges. This comes as a bank has proposed to exchanges that they preemptively restrict the transfer of coins due to the obligation to conduct risk assessments for anti-money laundering. This has led to speculation that the banking sector, judging that the drawbacks outweigh the benefits, may be distancing itself even from existing partner exchanges.

According to the financial sector on the 5th, NH Nonghyup Bank recently requested Bithumb and Coinone to temporarily block coin deposits and withdrawals. This is a proposal to restrict coin transfers between exchanges until the 'Travel Rule' system is established.

The Travel Rule is a regulation imposed by the Financial Action Task Force (FATF) that requires businesses (exchanges) to collect information on both the sender and receiver when transferring virtual currencies to prevent money laundering. Although the Travel Rule is set to be applied from March 25 next year, Nonghyup Bank proposed to halt coin transfers well ahead of this date.

Nonghyup Bank took this preemptive measure due to 'risk' factors. It was a decision made to prevent any potential money laundering-related risks in advance. A Nonghyup Bank official explained, "Since all responsibility related to anti-money laundering ultimately falls on the bank, we proposed to establish safeguards."

Shinhan Bank, which is partnered with Korbit, is reported to be in a similar situation. Since Nonghyup Bank took the initiative, Shinhan Bank is also considering requesting similar measures.

Within the banking sector, there are forecasts that it will become more difficult to renew contracts for real-name account issuance. A representative from a commercial bank said, "From the bank's perspective, there is nothing more sensitive than money laundering issues," adding, "There are talks that if the Travel Rule is not implemented, renewing contracts for real-name account issuance could also become difficult."

The reason banks are reacting so sensitively is largely due to the rejection of their 'exemption requests' that would absolve them of responsibility even if incidents such as money laundering occur at cryptocurrency exchanges. This situation has forced banks to take a more conservative approach.

Financial Services Commission Chairman Eun Sung-soo firmly rejected the exemption requests proposed by the Korea Federation of Banks earlier last month, stating, "The primary responsibility for money laundering lies with the banks." Even if exemption standards are established, they would only apply domestically and cannot serve as a means to avoid sanctions from foreign governments or financial authorities. Chairman Eun pointed out, "Even if financial authorities provide exemptions, would it be acceptable if a bank is fined for anti-money laundering in the United States?" and added, "There could be cases where domestic banks are unable to conduct transactions in New York due to money laundering issues."

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