According to an announcement on the 21st of January from the Korean Financial Services Commission and the banking industry, the 6 banks that support cryptocurrency transactions are establishing a real-name cryptocurrency system that will be put into effect beginning on the 30th. This is a change from the previous “virtual account system.” Under this system, money was deposited to a temporary account provided by the exchange upon which the funds were added to the users’ trading account after being deposited from any bank. This process was very simple and almost anyone could deposit money at any time.
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With the introduction of the real-name system, users in Korea will be required to use the same bank as exchanges in order to deposit and withdraw money. This bank is different depending on the exchange. Effectively, depending on the exchange that an investor uses, she/he will have to make a separate bank account at that bank for the purpose of cryptocurrency investing. (For example, users of Upbit, the largest exchange in Korea, will be required to have a Industrial Bank of Korea account designated as an account for cryptocurrency exchange deposits.) Additionally, applications for these “real-name accounts” seem that they will be much more difficult than typical bank accounts to create, with many additional rules and requirements that must be met in order to receive approval for an account. One of these is that an account can’t be created if another one has been created within the previous twenty days.
According to the banks, the purpose of this new system is to reduce money laundering as well as to prevent foreigners and minors from using the exchanges by connecting the identity of the money with the investor. Also, it seems as a check on the high amount of speculative investing occurring here, with the “Kimchi Premium” going up as much as 50% within the last month. (At time of writing it is around 10-15%.)
Another intention of the change is that it makes the process of taxing trading profits much easier in the event that a capital gains tax is attached to cryptocurrency trading. (Currently in Korea no taxes are taken from trading profits. No announcement has been made, but there is speculation that this will soon occur.) Also, there is currently the possibility of using this new system to limit trading amounts per investor.
While the “real-name” banking system hasn’t been put in place, temporary changes have been implemented as currently virtual accounts can’t be made for new users. Current users are still able to deposit and withdraw money with these virtual accounts. An unnamed member of one of the exchanges reported that “Once tax systems and money laundering prevention systems are put in place and the government has announced all of these, it seems that new account creation will be opened again. But for the time being, making a new account seems like it won’t be happening.”
While many may not welcome these new changes coming from the banks, it does seem that Korea has backed off of its previous announcement from the Minister of Justice that “all exchanges will be banned”. Instead, it is looking to work towards bringing cryptocurrency exchanges into current financial institutions.
What do you think of these new changes? Do you think the Korean government and banks are making the appropriate response to cryptocurrency? Is more regulation needed? Less? Also, why do you think the cryptocurrency and blockchain sphere has exploded in Korea?
Source: http://www.dt.co.kr/contents.html?article_no=2018012202100558047001&ref=naver
