- Although a group of South Korean crypto exchanges may be allowed to begin crypto-to-fiat trading, the outlook is divided on whether the 23 exchanges currently stuck in crypto-to-fiat limbo -crypto will be allowed to do so.
- All four major cryptocurrency exchanges have agreements with larger commercial banks, so they can continue to sell KRW pairs.
- the position of most banks has not changed much, and they still fear that the money laundering issues that have to be borne by the bank in the case of a crypto exchange-bank collaboration are prohibitively heavy .
After a groundbreaking banking deal last week, a group of South Korean crypto exchanges could be allowed to resume crypto-to-fiat trading, but opinions differ on whether the 23 exchanges currently trapped in crypto-to-crypto purgatory will be able to escape before being overwhelmed by financial pressures.
All four major cryptocurrency exchanges have agreements with major commercial banks
As previously reported, Gopax became the first non-big four crypto exchange in the country (after Upbit, Bithumb, Coinone, and Korbit) to strike a deal with a commercial bank last week, allowing it to begin crypto-to-crypto trading (under subject to regulatory approval). Gopax has signed an agreement with Jeonbuk Bank, a relatively new regional bank. All four major cryptocurrency exchanges have agreements with larger commercial banks, so they can continue to sell KRW pairs. Banks must provide exchange clients with linked, name-verified bank accounts that are monitored for any money laundering violations in these circumstances.
As a result of regulatory measures that came into force in September last year, a significant number of small and medium-sized exchanges were forced to close their doors or receive information security management system accreditation ( ISMS) from a government agency and remove fiat trading alternatives. Most banks refused to cooperate with these exchanges, putting them in a precarious position. Last week’s news, on the other hand, seems to have sparked renewed optimism.
According to Seoul Finance, many analysts believe that GDAC, Hanbitco, and Huobi Korea (three of the major crypto-to-crypto exchanges) have strong potential for renewed activity in the KRW market. These exchanges are known to plan to issue genuine name-verified accounts and are negotiating with banks, according to the report.
Last week, a senior executive at one of Gopax’s competitors said there was now quiet optimism for trading platforms to continue talking with local banks. According to Mira Kim, a South Korean blockchain consultant, large commercial banks are unlikely to accept transactions with exchanges as they remain too risk averse. However, she said many smaller banks of a scale comparable to Jeonbuk Bank were willing to find ways to work with exchanges. The success of Upbit and its banking partner, K-Bank, a newer bank, turned the heads of neobanks and regional banks last year, according to Kim.
As Kim said, the [smaller] banks see crypto exchanges as an opportunity to expand their customer base among the younger generation. They are interested, but there are still dangers. According to Seoul Finance, an anonymous commercial bank employee agreed with the latter statement. According to a source familiar with the matter, due to their strong interest in the crypto-asset market, banks continue to promote [crypto-]related companies. Issuing verified accounts with a real name, on the other hand, is another story. The general consensus is that there are more problems to solve here. And nothing has changed.
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Gopax could become a dark horse capable of breaking the Big Four’s crypto monopoly
According to the same research, most banks’ positions have not changed much, and they still fear that the money laundering issues that have to be borne by the bank in the event of a crypto exchange-bank collaboration will be d a prohibitive weight. Meanwhile, Newsway said Gopax could become a dark horse capable of breaking the Big Four’s crypto monopoly. The exchange is now expected to gain regulatory approval and start offering KRW trading in the first half of 2022, according to the same report. Because Jeonbuk has a small number of branches, Gopax predicted that most bank account opening activities will have to be done online.