Emerging cryptocurrency regulations are putting greater scrutiny on exchanges and companies worldwide. Starting August 1, 2018, Korean cryptocurrency exchange Bithumb will no longer issue new virtual accounts due to the failure to renew a banking contract.
South Korea Cracks Down on KYC and AML
Bithumb has suspended new bank-linked virtual accounts after failing to establish a contract with NH Nonghyup Bank, reports BusinessKorea.
Bithumb is the second largest South Korean digital asset exchange by 24-hour trading volume and holds 33% of the domestic market share, according to data by FinTechNews.
The temporary halt on new accounts will not impact or prevent current virtual account holders from withdrawing or depositing funds linked to their bank accounts.
Bithumb’s temporary halt follows South Korea’s recent ban on anonymous trading through anonymous virtual accounts in January 2018.
To prevent money laundering and increase market transparency, the mandate requires real name verification for an individual’s exchange and bank accounts before authorizing cryptocurrency trading.
The regulation also requires that cryptocurrency exchanges renew their contracts with commercial banks every six months, which Bithumb has failed to do.
Bithumb reportedly terminated its original contract with Shinhan Bank and opted to renew a separate contract with NH Nonghyup Bank but was recently denied. In an interview with BusinessKorea, an official from Nonghyup Bank said:
“We have decided not to renew the contract because Bithumb still has problems in protecting consumers and information and preventing money laundering.”
In mid-June, Bithumb suffered a large-scale hack and lost 35 billion KRW (~$31 million) from hot wallets stored on its exchange. Since then, Bithumb has recovered about half of the stolen funds.
Following Nonghyup’s denial to renew the contract, a Bithumb official said:
“We have a consensus with Nonghyup Bank on renewal of the contract. We are planning to iron out our different views on some legal expressions and start issuing virtual accounts soon.”
Among the top-4 cryptocurrency exchanges in South Korea, Bithumb is the currently the only operator without a commercial banking partnership. Coinone has renewed its contract with NH Nonghyup Bank, Upbit renewed its contract with the Industrial Bank of Korea, and Korbit completed its contract renewal with Shinhan Bank.
Cover Photo by Joshua Earle on Unsplash