Paycoin nixed by exchanges after failing to open required bank accounts

Finance

Published: 03 Apr. 2023, 17:37 Updated: 03 Apr. 2023, 18:28

Paycoin nixed by exchanges after failing to open required bank accounts

A model demonstrates the use of Paycoin to buy beverages at a cafe in southern Seoul in April 2021. [NEWS1]

Paycoin (PCI) will be booted from three crypto exchanges, including the largest in Korea, after failing to establish sub-accounts as required by the regulators.

Upbit, Bithumb and Coinone announced Friday the delisting of Paycoin starting April 14. The decision was due to the lack of real-name bank accounts for customers.

Jeonbuk Bank was a potential candidate for opening accounts, but the deal did not go through.

Issued by PayProtocol, a subsidiary of payment service firm Danal, Paycoin is used on the payments and remittance app Paycoin. The value of the coin, which has 3.2 million users, fell around 8 percent Monday and is down 87 percent from a year earlier.

“Some articles on the Act on Reporting and Use of certain Financial Transaction Information involving crypto is very ambiguous,” said an operator of a crypto company who spoke with anonymity. “That gives such a strong power to the financial regulators to arbitrarily and excessively interpret the articles, which is also affecting the decision of the Digital Asset eXchange Alliance (DAXA).”

DAXA was formed by five largest cryptocurrency exchanges in Korea.

“Domestic payment services have stopped using PCI,” Upbit said in a statement last week. “We've decided to end support for transactions in that additional investor damage could be caused, considering the rapid changes in business, and the accomplishments and the direction of overseas payment business.”

One-year Paycoin graph on CoinGecko [SCREEN CAPTURE]

Paycoin said it will support payments through bitcoin, not won, to overcome its inability establish real-name bank accounts. But the exchanges pushed with the plans to delist the coin.

“The true reason behind the delisting of Paycoin on the exchanges is its inability to have received the real-name bank account,” said Kim Hyoung-joong, professor at Korea University School of Cybersecurity. “It seems the exchanges came up with ambiguous reasons for the delisting because of the difficulty in using the reason as the grounds for the coin’s removal. It will be challenging for firms like Paycoin to enter the market until regulations are established.”

Paycoin was the second major local token to be removed on the exchanges after Wemix, the cryptocurrency issued by Wemade, in November. The coin was relisted on Coinone in February.

Paycoin’s alternative is to expand overseas. It plans to start service in Japan and Singapore by the second quarter. It hopes to attract users through promotions, including a cash-back event, it said.

“The local firms we announced to team up with in Singapore and Japan own the relevant payment license, and they are countries where payment service using the self-issued coins can be legally provided,” added Paycoin.

But the coin’s domestic failure could affect its overseas business.

“What happened in the domestic market, where the service started, could affect the investor sentiment abroad,” said a crypto source.

“Paycoin performed well domestically because it was able to offer a lot of discounts to consumers using the coin to purchase goods and use the network built by Danal,” said Kim Dong-hwan, CEO of Wonder Frame, a Seoul-based crypto consulting firm. “But there are already a lot of competitors abroad and it doesn’t have the network it has in Korea.

"It will be difficult to expect Paycoin to perform tremendously well abroad."

The chance of the coin to be relisted on domestic exchanges is less likely than Wemix.

“There’s a precedent of a removed coin being relisted, so it can’t be assured Paycoin will not be relisted.” Kim added, “But financial regulators have shown a tough stance on Paycoin, so not many banks will be willing to open a real-name account to Paycoin."

BY JIN MIN-JI [jin.minji@joongang.co.kr]