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South Korea to ban financial institutions from participating in cryptocurrencies, banks stop serving exchange

South Korean regulators have announced plans to ban banks from participating in cryptocurrencies, which has led major domestic banks to say they no longer serve accounts dealing with cryptocurrencies. Major South Korean bitcoin exchanges have been affected, including Bithumb, Coinone and Korbit. So far, banks that have publicly stated their position include Shinhan Bank, Korea Industrial Bank and Korea Small and Medium Enterprise Bank.

No participation in crypto currency transactions

The South Korean government regularly holds meetings to discuss the issue of cryptocurrency regulation. On Wednesday, local media reports regulators plan to ban banks from participating in cryptocurrencies:

The prime minister's office said Seoul would prohibit financial institutions from buying, holding virtual currency, and could not hold money in the form of collateral.
In addition, the media pointed out that "Korean banks that provide virtual bank account services for encrypted currency transactions will have to audit account holders when they create new accounts." Regulators also plan to prohibit youngsters and foreigners from trading cryptocurrencies, meanwhile Nor can they apply for a bank account in Korea.

Virtual bank accounts are established by traditional banks for users of cryptocurrencies. To trade on a crypto currency exchange, users first have to open a virtual bank account and then save in it. All large Korean exchanges require users to request a virtual bank account before they start trading, and Bithumb is no exception. Local media described:

Only in the virtual currency exchange registration, the funds deposited in the exchange designated virtual account before they can start virtual currency transactions.

Banks abandon encrypted currency accounts

On Wednesday, regulators for the first time ordered a fictitious bank account.

Some large South Korean state banks and commercial banks immediately responded by announcing the cessation of opening a new virtual bank account for the cryptocurrency exchange. Some even announced the cancellation of existing accounts. It is reported:

Such measures will force traders to leave the cryptocurrency market because users are required to create virtual accounts when trading on large exchanges such as Bithumb and Coinone.
If the bank closed the exchange's virtual bank account, buying and selling virtual currency through the bank is basically impossible.

Large banks exit

Banks that have decided to stop creating virtual accounts include Shinhan Bank, KDB, IBK, Woori Bank, Kookmin Bank, and Hana Bank of Korea.

Shinhan Bank is responsible for creating virtual accounts for Bithumb and Korbit, but does not cancel existing accounts. In November this year, the bank announced the launch of a cryptocurrency hosting service.

KDB, a state-owned bank, announced a complete cessation of operations involving cryptocurrency transactions, including Bitcoin, beginning in January next year.

Woori Bank to take similar measures and KDB. IBK, National Bank and Asiana Bank have also stopped creating virtual accounts. There are currently no statements of the Korean Agricultural Bank, whose clients include Bithumb, Coinone and Korbit.