South Korea’s Financial Services Commission (FSC) Commissioner Choi Jong-Ku has confirmed that there are no compliance or security concerns regarding commercial banks providing virtual bank accounts to domestic cryptocurrency exchanges.
Government Endorsement of Crypto-Bank Collaboration
During a national audit assessing the progress of government agencies, Commissioner Choi emphasized that digital asset platforms equipped with Know Your Customer (KYC) and Anti-Money Laundering (AML) systems can legally obtain banking services.
“Banks face no issues in providing virtual accounts to crypto exchanges. As long as platforms implement KYC/AML protocols, partnerships are fully compliant,” stated Choi.
How Virtual Bank Accounts Work in Korea
- Instant KRW Transactions: Users deposit/withdraw fiat seamlessly via exchange-linked virtual accounts.
- Regulatory Safeguards: Banks only collaborate with exchanges meeting FSC security standards.
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Shift from Restriction to Acceptance
2018 Policy Context:
Initially, South Korea discouraged bank-crypto partnerships to prevent money laundering risks. Major banks like Nonghyup even suspended services for Bithumb and other exchanges mid-2018.
Current Progress:
– The FSC’s clarified stance removes banking access barriers for compliant exchanges.
– Korean Blockchain Association reports resolved KYC/AML concerns raised 10 months prior.
Enhanced Security Measures
| Exchange | Security Achievements |
|---|---|
| Bithumb | Approved internal controls + insurance coverage |
| Upbit | Certified content management system |
| Gopax | Backed by Shinhan Bank’s infrastructure |
Market Competition Intensifies
With Nonghyup limiting Bithumb’s banking options, investors migrated to alternatives like:
– Gopax: Supports all local banks via Shinhan
– Upbit: Partnered with Kakao and Dunamu
– Korbit/Coinone: Government-approved security protocols
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Industry Growth Indicators
- Diversified Services: Exchanges now offer KRW pairs, insurance, and institutional-grade custody.
- User Benefits: Increased competition lowers fees and improves liquidity.
Frequently Asked Questions
Q: Can Korean exchanges operate without bank partnerships?
A: No—virtual bank accounts are mandatory for KRW transactions under FSC rules.
Q: What triggered the policy reversal?
A: Improved AML frameworks and KISA security audits satisfied regulatory concerns.
Q: Which banks currently support crypto exchanges?
A: Shinhan leads, while Nonghyup maintains limited ties. More banks are expected to join.
Q: Are foreign investors eligible for KRW trading?
A: Only verified residents using实名认证 (real-name verification) can deposit/withdraw fiat.
Q: How do exchanges prevent hacks?
A: Mandatory cold storage, regular KISA audits, and investor protection funds.
Q: What’s next for Korea’s crypto market?
A: Anticipated ETF approvals and CBDC pilot integrations may further legitimize the sector.