Bank Freeze Forces Korean Crypto Exchange Bithumb to Disable New Accounts: Report

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South Korean crypto exchange giant Bithumb has suspended the issuance of new KYC bank-linked virtual accounts after failure to renew and establish a contract with a bank, as mandated by new guidelines this year.

Starting today, August 1, Bithumb – one of Korea’s ‘big four’ exchanges – is no longer issuing new virtual accounts to customers due to the lack of a banking partner, according to a report by Business Korea. The freeze will not impact customers who already have virtual accounts at the exchange, used for deposits and withdrawals through linked bank accounts.

For context, South Korean regulators moved to ban anonymous trading through anonymous virtual bank accounts earlier in January. Subsequently, six South Korean banks began issuing new trading accounts for cryptocurrency transactions on January 30 wherein – under new KYC mandated rules – cryptocurrency trading is only allowed for investors when their name at their bank-issued virtual account matches that of their account name at the cryptocurrency exchange.

Accordingly, cryptocurrency exchanges are also required to renew their contracts with banks every six months.

As CCN reported at the time, Shinhan Bank moved to support Bithumb in a contract that has since been terminated. Bithumb sought to renew a separate contract with Nonghyup Bank, another ‘big four’ Korean bank, with a request that has been turned down, according to today’s report.

The decision was taken due to the bank’s concerns in Bithumb’s cybersecurity posture and customer safeguards, particularly in the aftermath of June’s incident wherein hackers siphoned $30 million in cryptocurrencies from Bithumb’s hot wallet.

An official from Nonghyup Bank told Business Korea:

“We have decided not to renew the contract because Bithumb still has problems in protecting consumers and information and preventing money laundering.”

As a result, Bithumb is left as the only operator among Korea’s ‘big four’ exchanges without a banking partnership for virtual accounts. Meanwhile, Coinone has renewed its contract with Nonghyup Bank while Upbit extended its ties with the Industrial Bank of Korea. The other major exchange, Korbit, has also renewed its contract with Shinhan Bank.

“We are planning to iron out our different views on some legal expressions and start issuing virtual accounts soon,” a Bithumb official insisted, stressing the exchange had reached a “consensus” to renew the contract with Nonghyup Bank.

Featured image from Shutterstock.

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