Three South Korean banks have decided not to work with the country’s cryptocurrency exchanges amid the increasingly strict regulatory framework.
In a survey by Yonhap News, the banks, including Woori Financial Group, KB Financial Group, and Hana, arrived at a decision stating the regulatory environment poses more risks to engage with crypto exchanges.
The survey follows the enactment of the Special Payment Act and Enforcement decree. Under the new changes, South Korean crypto exchanges will need to arrange banking contracts or risk closure alongside legal prosecution. The new regulations will take effect from September 24, 2021.
Despite the regulatory clarity, facilities like KB stated they prefer to completely cut ties with crypto exchanges.
“Cryptocurrencies may someday be incorporated into the system, but for now, as there is a risk of being involved in crimes such as money laundering, it is very burdensome to transact. (…) I’m not considering it,” said a senior KB Financial Group official.”
Furthermore, top officials from Woori Financial Group believe their stand on crypto exchanges might be similar to other lenders. The officials note that the banks are unwilling to risk their positions while promoting possible money laundering schemes associated with the crypto sector.
Commercial meet on dealing with crypto exchanges
Notably, representatives from commercial banks have already met to deliberate on how to enact the risk assessment before engaging with crypto exchanges. The banks are reportedly contemplating looking at history of embezzlement or fraud, bankruptcy rehabilitation, suspensions, external hacks, poor credit rating, and experienced prolonged net losses.
Furthermore, the focus on hacking history might spell doom for crypto exchanges since they have a bad record of external attacks.
The new regulations might result in a further crypto market correction. Over the weekend, bitcoin dropped by almost 50% of its $64,800 all-time high price following news of the accelerated crackdown in China.