South Korean lenders K Bank, Nonghyup Bank and Shinhan Bank have started money laundering risk assessments of the country’s “big four” cryptocurrency exchanges, with which they have contracts to provide real-name accounts. The renewal of those contracts is imminent. 

Fast facts:

  • According to multiple media reports, NH Nonghyup Bank has begun assessing Bithumb and Coinone, Shinhan Bank has started looking at Korbit, and K-Bank has been evaluating Upbit for anti-money laundering compliance. Banks will review information security management system certifications, police records of representatives, executives and employees, anti-money laundering systems, and internal controls.
  • The Act on Reporting and Use of Certain Financial Transaction Information, better known as the crypto exchange law, requires virtual asset exchanges to obtain contracts with banks to provide users’ real-name bank accounts for withdrawals and deposits of Korean won on their trading platforms. Exchanges have until Sept. 24 to acquire contracts in order to continue operating. The “big four” are the only exchanges that currently hold bank contracts. 
  • Smaller crypto exchanges are in a more difficult position as KB Kookmin Bank, Hana Bank, Woori Bank and Busan Bank have decided not to open real-name accounts for crypto exchanges. Toss Bank, which will launch in September, has also officially announced that it does not plan to partner with cryptocurrency exchanges. Industry players expect many small and medium-sized exchanges to close their bank accounts in September.
  • Lee Byung-uk, a professor of digital finance at the Seoul School of Integrated Sciences & Technologies, known as aSSIST, told Forkast.News: “When we think about the situation from the bank’s perspective, the risk of one money laundering incident is far too great. The additional profit from more clients through the contract might not be worth that risk. So I believe [most] banks will not change their stance on this matter.”
  • Lee added that because small and medium-sized exchanges would close their bank accounts, they would cease accepting fiat currency in exchange for crypto, or even close.