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South Korean Banks not to offer virtual currency accounts

2018.01.14 10:56:37 | 2018.01.14 13:19:04
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South Korea’s major commercial bank Shinhan Bank will scrap a plan to introduce a real-name verification service that will allow its customers to open accounts for virtual currency trading under their names, citing brewing controversy over cryptocurrency trading.

As its local peers are also known to be considering a similar move, digital currency trading in the country that is responsible for 20 percent of daily global digital currency trading volume may eventually lose steam amid the government’s ongoing efforts to seek to crack down on bitcoin and other cryptocurrency exchanges to curb speculative trading.

Shinhan Bank said on Friday that it has decided not to adopt a real-name verification service for cryptocurrency transactions under virtual bank accounts. An unnamed official from Shinhan Bank said the bank has already developed a real-name verification service for digital currency trading but ditched the plan to adopt it because cryptocurrency trade has become a serious social concern.

Last month, the Korean government banned commercial banks from issuing new virtual currency accounts and pushed them to introduce a real-name verification service for withdrawals and deposits from digital accounts as part of efforts to clamp down the country’s unfazed fever over digital currencies. It labelled cryptocurrency as illicit speculative instrument.

Starting January this year, all trades in cryptocurrency must be done in real name and accounts of registered exchanges. Shinhan Bank and other major lenders last month agreed to follow the government’s special acts.

But as Shinhan Bank has decided not to introduce the real-name verification service, the bank will eventually stop issuing new accounts for transactions of virtual currencies. Shinhan Bank has already informed three virtual currency operators - Bithumb, Korbit, and Eya Labs - to come up with plans of closing existing virtual accounts.

Other lenders including KEB Hana Bank and Industrial Bank of Korea are also reported to be mulling joining the move, according to sources. If more lenders follow suit Shinhan Bank, virtual currency operators may have to manage multiple individual accounts under their corporate accounts or transfer funds to other lenders that provide a real-name verification service.

The latest move by lenders has come after the country’s justice minister Park Sang-ki on Thursday warned that his ministry was preparing a bill to ban digital currency trading through exchanges in fear of any astronomical losses when the bitcoin bubble burst. The comment caused a plunge in the price of bitcoin and other digital currencies, but soon the market recouped losses after a spokesman for the country’s presidential office told reporters less than 10 hours later that the plan to close virtual currency exchanges wasn’t finalized.

Some market observers said that cryptocurrency traders may flock to offline digital currency markets that are generally left unchecked by financial authorities should all lenders decide not to issue virtual account services.

Still, an unnamed official from a commercial bank said lenders’ latest decision not to issue virtual currency accounts will practically lead them to reject payment and settlement services for cryptocurrency operators and this would be more effective in calming down the market than the government’s radical measures such as possible shutdown of virtual account exchanges.

By Kim Tae-sung and Lee Eun-joo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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