The new South Korean cryptocurrency account system has entered into force nationwide today, ending the current practice that allowed for anonymous trading of cryptocurrencies. Traders must open real-name accounts at the same banks as their exchanges in order to deposit money to trade cryptocurrencies.
Real-Name System Enforced
South Korea begins converting existing virtual cryptocurrency accounts to real-name accounts today as mandated by the government.
The implementation of this new account system effectively ends “the use of anonymous bank accounts in transactions to prevent virtual coins from being used for money laundering and other illegal activities,” Yonhap reported.
Six major banks in the country are participating in this new system so far: Shinhan Bank, Nonghyup Bank, Industrial Bank of Korea, Kookmin Bank, Hana Bank, and Gwangju Bank. The news outlet elaborated:
Opening cryptocurrency accounts has been banned for weeks while the banks have installed the system, which ensures only real-name bank accounts and matching accounts at cryptocurrency exchanges for deposits and withdrawals.
“Foreigners and underage investors are banned from opening cryptocurrency accounts in South Korea,” the publication noted, adding that “The new system also requires cryptocurrency exchanges to share users’ transaction data with banks.” Traders with existing virtual accounts will be fined if they keep depositing money into their existing accounts.
Business As Usual for Banks
“The market forecasted that there will be a lot of requests for opening new accounts following the introduction of the real-name system,” Maekyung wrote. However, on the first day of introducing the real-name system, the news outlet noted that banks are seeing little changes from the previous year, adding that some customers may have opened accounts online.
An IBK official told the publication that “there is no big difference” in the number of customers opening accounts at the bank.
A Chosun reporter visited several banks and found no unusual traffic. At a Shinhan Bank branch, there was a “customer guide” with definitions of crypto-related terms. It also includes an anti-money laundering guideline.
Real Name Verification
Korea Business explains that “Real name verification is possible only if there is an account of the person’s name at the bank that the virtual currency trading company uses.”
To open a new bank account for trading cryptocurrencies, customers “must submit documents to the bank…such as payroll, utility bills, credit card payments,” the news outlet detailed.
Bithumb has been trading with Nonghyup Bank and Shinhan Bank, Upbit with Industrial Bank of Korea (IBK), Coinone with Nonghyup Bank, and Korbit with Shinhan Bank. “Looking at the number of virtual accounts that are subject to the real-name system conversion, IBK has 570,000, Nonghyup Bank 1 million, and Shinhan Bank 140,000,” Hankyung reported.
Smaller Exchanges Could Suffer
Small and medium-sized cryptocurrency exchanges are expected to suffer from the conversion into the real-name system, local media report, citing that banks are reluctant to issue new accounts for them and they can no longer use existing corporate accounts.
The Korean Blockchain Association revealed that 10 companies out of its 25 crypto exchange members use corporate accounts in place of virtual accounts. They include Coinnest, Gopax, Coinlink, and Eyalabs, Maekyung reported. The publication quoted the association explaining, “Exchanges that have not been granted virtual accounts have fallen into the blind spot of regulation.”
What do you think of this new South Korean system? Let us know in the comments section below.
Images courtesy of Shutterstock and Chosun.
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