South Korean watchdogs to probe local banks over AML procedures for crypto exchanges

Written by: Michael Harris
March 11, 2020

South Korean regulators are launching a probe into local banks over their implementation of anti-money laundering procedures for digital currency exchanges, industry website Coindesk has reported, citing information that surfaced in the local media.

According to South Korean news agency Yonhap, the Financial Services Commission (FSC) plan to launch the investigation, which will be aimed at lenders that offer corporate accounts to virtual coin exchanges, next month.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

South Korean regulators have since the start of the year stepped up their efforts to reign cryptocurrency trading speculation and the use of digital currencies for money laundering. In late January, the FSC ended anonymous cryptocurrency trading in the country, by ordering local banks to switch to real-name account systems for digital currency trading. Under the new regime digital currency exchanges are required to adopt this identification in order to continue their operations.

While major exchanges such as Bithumb has had a smooth transition, some smaller trading platforms have struggled to adapt to the new rules. In early February, lesser-known South Korean crypto exchange Coinpia, announced that it was shutting down its operations due to continued difficulties in integrating identity verification into its existing exchange system. Some reports have suggested that local banks may be denying implementation of the system to smaller exchanges.

While South Korean authorities are taking measures to tackle the risks associated with cryptocurrencies, they seem keen on harnessing the potential of crypto’s underlying technology, the blockchain. Earlier this week the FSC said that it would encourage local banks and insurance companies to use blockchain technology in new payment systems to enhance the security of clients’ financial information. The FSC also believes that blockchain can further benefit customers by simplifying verification procedures. This suggests that the watchdog considers blockchain to be an important part of its push to bolster the local fintech sector.