Today marks the end of anonymous cryptocurrency trading in South Korea. This is after the government in the country rolled out a new cryptocurrency “real-name account” system. The system requires traders to open real-name accounts in the same banks in which their exchanges transact, in order to be able to deposit and withdraw money for cryptocurrency trading.
Real-Name Account System
The new system was implemented by the government to prevent the use of funds by anonymous owners in illegal activities such as money laundering and tax evasion. Among the banks that will be part of the new system are Industrial Bank of Korea (IBK), Hana Bank, Shinhan Bank, Kookmin Bank, Gwangju Bank and Nongyup Bank. Exchanges will be required to share their user data with different banks.
Traders that wish to engage in cryptocurrency trading will have to link their trading platform to an account with a local bank, which has been opened under their name or by them personally. This will allow for real-name verification by the exchange. This is only possible if the trader has an account in the same bank that the exchange uses. Foreigners will also have to open local bank accounts to engage in cryptocurrency trading, while those younger than 19 years will not be able to transact, as they cannot own accounts.
What This Means for Virtual Account Owners
The new system will result in virtual accounts that are used for crypto trading being canceled. Those that have the virtual accounts will be fined if they keep on depositing money into the accounts. Those customers that want to open new accounts for the buying and selling of cryptocurrencies will have to provide their banks with personal documents such as utility bills, payroll and credit card payments to verify their identity.
Effect on Bank Operations
There was a market forecast that the requests for opening new bank accounts would soar following the launch of the real-name system. However, there was little change in the bank’s operations even on the day the system was introduced, although some banks had posted customer guides on how to open these new accounts. The banks have a right to refuse the opening of bank accounts for those cryptocurrency traders who are not willing to disclose information that can be used for verification. The number of anonymous accounts that are expected to be changed to the real-name system is expected to be up at around 1 million for Nonghyup bank, which trades with the Coinone exchange, 570,000 for the Industrial bank of Korea which trades with Upbit and 140,000 for Shinhan Bank which trades with Bithumb.
Effect On the Crypto Market
This new system will see the closure of exchanges that could be exploited for illegal activities. The move could also affect smaller exchanges as they are expected to change to the new system. However, most banks are not willing to open new accounts for these exchanges, which makes it hard to successfully transition to the new system. The new system also affects the anonymity characteristic of cryptocurrencies. However, the outcome of the new system has been said to be favorable for the crypto market in South Korea, considering initial worst-case rumors that the government might entirely ban cryptocurrency trading in the country.
Do you think South Korea made the right decision in banning anonymous cryptocurrency trading? Let us know your views in the comments section below.