Banks will have to reveal the status of their engagement with crypto exchanges including details of corporate accounts and bank monitoring methods
Financial authorities in South Korea are trying to further advance their probe into cryptocurrency firms as banks have been asked to declare the number of cryptocurrencies businesses they serve, local reports suggested yesterday.
The information has been asked in order to calculate the exact number of digital assets exchanges operating in the country, authorities have said.
The demand by financial authorities emerged days after Koo Yun-cheol, the head of the Office for Government Policy Coordination in South Korea revealed that the government was planning an interagency crackdown on illegal operations involving cryptocurrencies in the country.
He reasoned that such an action was required in order to address the growing concern over the booming crypto markets leading to a surge in speculative investments and illegal activities.
Koo Yun-cheol had particularly stated that the Financial Services Commission is taking steps to draft a framework that will require local financial institutions to strengthen the monitoring of cryptocurrency-based activity.
The present requirement mandating banks to reveal information about crypto exchanges can be viewed as the first step in the process.
Currently, the banks have been asked to reveal the status of their engagement with crypto exchanges including details of corporate accounts and bank monitoring methods. Reports did not reveal which financial authority issued the order.
“Currently, cryptocurrency exchanges can operate without permission from the government, which is why it is difficult to identify the exact number of cryptocurrency exchanges,” said an official at a local cryptocurrency exchange on the condition of anonymity
“One way to find out is to track corporate bank accounts that collect customers’ funds,” he added.
The new requirements might also make it easier for Korea to officially impose the controversial Act on Reporting and Using Specified Financial Transaction Information.
The Act, which mandated real-name account trading in local banks for all local crypto exchanges, has been criticised as a means to monopolise the crypto market in South Korea as it set standards so high that only the big four crypto firms in the country could abide by it.
The local exchanges are also expected to be the worst hit by the orders issued yesterday by the financial authorities.
While the big four crypto exchanges already use real-name accounts, smaller firms gather funds from users under one corporate bank account, making them more vulnerable to scrutiny by Korea’s financial regulators.
Further, the exercise to identify the exact number of crypto exchanges in the country is being speculated to be a move to enable the government to impose sanctions on unregistered businesses after the grace period for the Act ends.
Despite the government’s insistence that the initiatives are being taken to prevent financial crimes such as money laundering, its damaging effect on domestic crypto firms in the country are evident.