South Korean banks Woori Financial Group, KB Financial Group and Hana bank said they have decided not to deal with domestic cryptocurrency exchanges. The surveyed financial institutions cited risks such as what a market possesses and the current regulatory environment ruling the country nowadays as the main reasons behind their stance.
The decision was revealed during a survey conducted by Yonhap News in the wake of the recently enacted Special Payment Act and Enforcement decree. Under such a revised set of rules, South Korean crypto exchanges are required to arrange banking contracts or be at risk of closing operations and even facing legal prosecution, with a deadline of September 24, 2021 set, to comply with the mandate.
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However, banks such as KB are unwilling to arrange business deals with any crypto exchanges in the country. “Cryptocurrencies may someday be incorporated into the system, but for now, as there is a risk of being involved in crimes such as money laundering, it is very burdensome to transact. (…) I’m not considering it,” a senior KB Financial Group official said.
On the same line, a high-ranking official of Woori Financial Group pointed out that other financial holdings might have similar thoughts. “But, the burden of financial accidents such as money laundering and hacking is too great while the related profits such as fees are not large,” he added.
South Korean Exchanges under Banks’ Scrutiny
Some South Korean commercial bank representatives met last week to discuss how they should carry risk checks before accepting dealings with crypto exchanges.
According to Yonhap, the guidelines include checking if senior officials or platforms have: “a history of embezzlement and/or fraud; a history of bankruptcy rehabilitation and/or business suspensions; been the subject of external hacks; poor credit rating; experienced prolonged net losses.”
In fact, there are reports on how the factor of the external hacks could hurt exchanges’ feasibility to deal with banks because most of the South Korean major crypto exchanges have faced massive hacks in the last few years.