Some banks profit from crypto-craze

Finance

Published: 01 Jun. 2021, 17:26 Updated: 01 Jun. 2021, 19:53

Some banks profit from crypto-craze

A graph tracing prices of bitcoin is displayed at a digital screen operated by Bithumb in Gangnam Distrcit, southern Seoul, on Tuesday. Bitcoin prices rose by 1.89 percent at Bithumb Tuesday morning to 44.12 million won ($39,900) compared to 24 hours ago, according to the exchange. [YONHAP]

The amount of money used from bank accounts for cryptocurrency trading was over 64 trillion won ($57.9 billion) in the first quarter of this year, according to a report released by the office of Rep. Kim Byung-wook of the Democratic Party of Korea Tuesday.

According to the report, which is based on data compiled by the Financial Supervisory Service, cryptocurrency trading with funds from bank accounts registered at K bank, Shinhan Bank and NongHyup Bank amounted to 64.2 trillion won during the first three months of this year. The bank accounts must be "real name," or in the name of the individual doing the trading.

That figure is 74 percent larger than the 37 trillion won in cryptocurrency trading done from bank accounts in all of 2020.

Exchanges not partnering with banks that offer real-name bank accounts for trading use so-called virtual accounts, which are temporary accounts tied to corporate accounts of cryptocurrency exchanges.

As trading in cryptocurrencies skyrocketed early this year, banks partnering with cryptocurrency exchanges earned big commissions.

The country's first internet-only bank, K bank, offers real-name accounts for trading on Upbit, the country's largest cryptocurrency exchange by volume. Shinhan Bank offers accounts for Korbit, while NongHyup Bank joined forces with Bithumb and Coinone.

K bank earned roughly 5 billion won in commissions for trades on Upbit in the first quarter, the report said.

K bank's 5 billion won in commissions is nearly ten times the 562 million won it received in commissions from Upbit in the fourth quarter of 2020. Since the bank only started working with Upbit last June, there is no data for the first quarter of last year.

In the January-March quarter, Shinhan Bank earned 145 million won in commissions from Korbit, a whopping 806 percent increase from 16 million won in the same quarter a year earlier. NongHyup Bank earned 1.3 billion won in commissions from Bithumb, up 275 percent on-year, and 333 million won from Coinone, up 397 percent.

"The investment frenzy in cryptocurrencies has brought a massive increase in the number of real-name bank accounts for trading and commissions [for banks,]" Kim said in a statement Tuesday. "The country's financial regulators and banks need to strive to protect investors from crypto asset frauds and hacking and come up with related regulations."

Despite the mushrooming of commissions, banks remain reluctant to ink new partnerships with smaller exchanges to offer real-name bank accounts.

Local exchanges have to find banks that will offer real-name bank accounts by the end of September to keep operating. After an amendment to the Act on Reporting and Using Specified Financial Transaction Information took effect in March, exchanges were given six months to find such banks.

"There's too much risk involved in partnering with cryptocurrency exchanges, including money laundering and crypto asset-related fraud, which the banks could be held responsible for," a source in the banking industry said.

Banks currently not opening real-name accounts for cryptocurrency exchanges, such as KB Kookmin Bank, Hana Bank, and Woori Bank, said they have no plans to start. Banks that do, like K bank, say they have no plans to expand partnerships with more exchanges.

"Partnering with Upbit was part of our strategy to expand partnerships with companies from various sectors to offer a wider range of services to our users," a spokesperson for K bank said.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]