Banks get cold feet on cryptocurrency accounts

Cryptocurrency exchange Bithumb’s walk-in service center in Seoul is crowded with customers fearing the closure of local exchanges on Thursday. [YONHAP]

Leading local banks Friday ditched plans to allow clients to open real-name accounts for cryptocurrency transactions, as the government considers a total ban on trading.

Shinhan Bank, the second-largest commercial bank in Korea, and Industrial Bank of Korea announced they would not go through with plans for the transactions.

“We have already finished developing the system for adopting real-name accounts for cryptocurrency transactions but we have concluded it would be better not to proceed when cryptocurrencies have become such a serious social issue,” said a Shinhan Bank spokesman.

The bank is temporarily banning deposits in anonymous accounts used for cryptocurrency trading from Jan. 15, only allowing withdrawals. The suspension will remain valid until the bank has established a new system that prevents money laundering.

On Friday it was discovered that Shinhan Bank two days earlier notified major local cryptocurrency exchanges such as Bithumb and Korbit that they should come up with measures to get rid of existing anonymous accounts.

KB Kookmin Bank, Korea’s biggest commercial bank, and KEB Hana Bank also maintained cautious stances.

They said they won’t launch cryptocurrency transaction services until financial authorities have completed setting up related regulations. The former was quick to suspend issuance of new anonymous accounts and to abolish all existing ones in July. The latter has never allowed anonymous accounts for cryptocurrencies. Woori Bank and Korea Development Bank also got rid of all anonymous accounts late last year.

On Thursday morning, Minister of Justice Park Sang-ki told reporters that his ministry was preparing a bill to prohibit digital currency trading through exchanges, without elaborating on the timing. Park’s remarks seem to have not been coordinated with other parts of the government. They prompted anger from cryptocurrency investors and thousands signed a petition asking the Blue House to halt the crackdown on cryptocurrency trading.

Just seven hours after the justice minister’s comments on Thursday, a spokesman for the presidential office told reporters the plan to close virtual currency exchanges “wasn’t finalized.”

Finance Minister Kim Dong-yeon on Friday reiterated that position to calm down infuriated investors.

The issue “still requires additional discussion among related government institutions,” he said, adding they are trying to come up with “desirable regulations on a reasonable level.”

He went on to defend blockchain, the underlying technology behind cryptocurrencies.

“[Regulating cryptocurrencies] embraces the issue of blockchain, which some people claim will be a fundamental pillar of the fourth industrial revolution and bears a lot of connections with logistics,” he said. “I think we should have a more balanced perspective on blockchain.”

Cryptocurrency exchanges expressed frustration with the government.

“When the government renews cryptocurrency policies so often, how can people trust it?” said Kim Jin-hwa, co-head of the Korea Blockchain Association, on Friday. “The government should take all the responsibility for considering up to 4 million virtual currency investors potential criminals.”

BY SEO JI-EUN [seo.jieun@joongang.co.kr]