Shinhan Bank Considers Stopping Virtual Accounts to Crypto Exchanges

Shinhan Bank may stop issuing virtual accounts for crypto exchange Korbit. This is done in a manner that does not extend the term of an expired service contract. In this case, the number of exchanges that can buy and sell cryptocurrencies in South Korea after depositing cash through a real-name verification account is reduced to three, such as Upbit, Bithumb, and Coin One.

Shinhan Bank Declares War on Telephone Financial Scams On the 30th of last month, Shinhan Bank issued a press release titled "Declaration of War on Telephone Financial Scams." According to the press release, in order to eradicate telephone financial fraud, the bank has established specialized organizations and research institutions, and has also set up comprehensive measures such as the construction of artificial intelligence monitoring systems. In a press release, Shinhan Bank stated, "We are reviewing basic measures regarding virtual currency exchanges."

According to sources, before the contract to provide virtual accounts to Korbit expires, Shinhan Bank is considering completely terminating the deal. The department is expected to make a decision as soon as next week, after a dedicated organization to deal with phone financial scams was completed this month. But a Shinhan Bank official said "no decision has been made yet".

If the bank takes this action, customers will not be able to find their funds in Korbit's virtual account Initially, Shinhan Bank also reviewed the renewal of the contract by introducing a '72-hour delayed deposit'. However, international financial institutions have imposed stricter regulations on anti-money laundering (AML). The bank may judge that the risk to the bank is greater when compared with the benefits of offering a virtual account.

If a bank account is used for phone fraud and funds remain in the account, the bank can withdraw the remaining funds by suspending payments. However, if it's a virtual account on an exchange, you can't quite find it if you buy cryptocurrency and send it to another wallet. Virtual bank accounts are much more dangerous than regular bank accounts.

What about Korbit customers? Even if Shinhan Bank terminates the contract, they cannot make deposits but can withdraw money. Due to the phone scam incident, Korbit was temporarily blocked from making deposits. Korbit is a domestic company, but it cannot deposit Korean won like foreign exchanges. As of 1:30 pm on the 4th, the price of Bitcoin was about 12.7 million won. It is 10% cheaper than the price of Upbit, Bithumb exchange (about 14 million won) because it cannot make deposits in won.

Investors can continue to trade on Korbit, but they may leave. This is because there is no need to use domestic exchanges that cannot deposit won. If Shinhan Bank terminates the contract, Korbit may be in a state of death. A Korbit official said, “In this way we will die. But we are committed to building a system that is better than any exchange. We ask the relevant authorities to create an environment that can function normally.”

Rani's note In June 2017, the cryptocurrency exchange Bithumb leaked 31,000 personal information. Because it became a social issue, KB Kookmin Bank, which provided virtual account services at the time, immediately stopped transactions with Bithumb. Since then, Bithumb has started trading with NH Bank. In November of the same year, the term of Yoon Jong-gyu, chairman of KB Kookmin Bank and chairman of KB Financial Group, expired. For Chairman Yoon's re-election, there should be no noise that might irritate and interfere with the financial authorities. Industry insiders analyzed that during the process, KB Kookmin Bank quickly decided to stop trading with Bithumb.

Most of the crypto exchanges that have recently had their deposits stopped due to phone-based financial scams have accounts with Shinhan Bank. Shinhan Bank pays special attention to preventing money laundering. Is this a pre-emptive risk management in response to the tightening of global regulatory standards? Is Shinhan Bank careful not to provoke the regulatory authorities in advance in order to seek the re-election of Chairman Cho Yong-byung, who is due to expire in March next year? Only Shinhan Bank knows why. However, if exchanges that operate normally are restricted, there will be a side effect of an increase in illegally operating markets. If so, who will protect investors?