BUSINESS

Top financial regulator calls on banks to ‘gate-keep’ cryptocurrency craze

By Son Ji-hyoung
  • Published : Jan 8, 2018 - 16:22
  • Updated : Jan 8, 2018 - 18:20
South Korea’s top financial regulator on Monday called on banks to act as “gatekeepers” in monitoring cryptocurrency-related transactions, elaborating on the need to set off a nationwide survey Monday on banks that have provided virtual accounts for the transactions.

“Concerns are rising as banks have kept mum about money flows for illegal use, instead of taking the role of gatekeepers,” said head of the Financial Services Commission Choi Jong-ku in a press conference Monday, referring to the millions of virtual accounts offered by banks to traders in exchanges here for virtual currencies like bitcoin, ethereum or ripple, convertible to the Korean won.

“Virtual currency transactions are highly susceptible for money laundering, given that the transactions implicate anonymity and are not made face-to-face,” he added.

Financial Services Commission Chairman Choi Jong-ku enters a press briefing in Seoul on Monday to explain the inspection on banks related to cryptocurrency transactions and warn of risks. (Yonhap)
This came after the Financial Supervisory Service and the Korea Financial Intelligence Unit launched a joint investigation on banks starting Monday on whether they abided by obligations to detect money laundering and non-real-name transactions. 

As of December, 111 bank accounts from six local commercial banks were estimated to put about 2 trillion won ($1.88 billion) in deposits through virtual accounts linked to them. About 40 percent of the money went to those by Nonghyup bank that has partnered with the nation‘s largest exchange Bithumb.

Probing banks is all that the FSC can do within legal boundaries, said Choi, considering the legal vacuum to regulate cryptocurrency exchanges and time it would take to enact the revision to put the exchanges under its radar.

“Before a new revision takes effect, we need to heed warnings on those involved in the illegal money transactions,” he said.

While saying the world faces a “policy challenge pandemic,” Choi said the trial-and-error that Korea went through can help shape possible trilateral efforts with Beijing and Tokyo.

Choi left open the possibility that the government could shut down all cryptocurrency-linked business entities to minimize side effects.

“A virtual currency does not play the role of a medium of payment,” he said. “It only triggers side effects, such as money laundering, fraud, illegal fundraising, hacking attacks and irrational speculation.”

During the press conference, Choi declined to comment on detailed plans to impose tax on cryptocurrency transactions. Also, he did not elaborate on consequences that banks would face in case of any regulation breach, other than suspending virtual account supplies.

The bitcoin price remained unaffected by the news. A bitcoin in Korean exchanges was trading at 25.2 million won as of 4:40 p.m., up 0.8 percent from a day prior, which was nearly 50 percent more expensive than the world’s average, according to crypto coin price tracker Coinass.

By Son Ji-hyoung
(consnow@heraldcorp.com)