A group of South Korean crypto exchanges could be granted permission to resume crypto-to-fiat trading after a breakthrough banking deal last week – but opinions differ on whether the 23 exchanges currently trapped in crypto-to-crypto purgatory will escape before they are overwhelmed by financial pressures.
As reported, last week Gopax became the country’s first non-“big four” crypto exchange (after Upbit, Bithumb, Coinone, and Korbit) to strike a deal with a commercial bank – a move that should allow it to resume crypto-to-crypto trading (subject to regulatory approval).
Gopax sealed its deal with Jeonbuk Bank, a newer, regional bank.
The big four crypto exchanges have deals with larger commercial banks, and have thus been allowed to continue offering KRW pairs. The banks in these cases must provide exchange customers with real name-verified, linked bank accounts, which are monitored for possible money-laundering violations,
A large number of small and medium-sized exchanges were forced to either close their doors or obtain Information Security Management System (ISMS) certification from a government agency and remove fiat trading options following regulatory measures that became effective in September last year.
These exchanges have been left in a perilous situation, with most banks unwilling to partner with them. However, last week’s news appears to have offered new hope.
Seoul Finance reported that GDAC, Hanbitco, and Huobi Korea (three of the largest crypto-to-crypto exchanges) were considered by many observers to have “a high possibility of resuming KRW market activities. The report added that “it is known that these exchanges are preparing for the issuance of real name-verified accounts and are in the process of negotiating with banks.”
A senior employee at one of Gopax’s rivals told Cryptonews.com last week that there was now “quiet optimism” for the trading platforms who are “continuing to speak to” domestic banks.
On Monday, Mira Kim, a South Korean blockchain consultant, told Cryptonews.com that larger commercial banks were unlikely to agree deals with exchanges as they “remain too risk-averse.” But, she added, “a number of smaller banks, on a similar scale to Jeonbuk Bank” were “open” to finding solutions that would allow them to work with exchanges.
Kim added that the success last year of Upbit and its banking partner K-Bank, also a newer bank, had “turned the heads” of neobanks and regional banks.
“The [smaller] banks see crypto exchanges as a possible way to boost their customer base among younger people. They are interested, but risks still remain.”
An unnamed commercial banking employee quoted by Seoul Finance concurred with the latter point.
The insider was quoted as saying:
“Banks are also continuing to promote [crypto-]related businesses due to their high level of interest in the cryptoasset market. However, issuing real name-verified accounts is a separate matter. The position here is that there are more problems to be dealt with here. And that has not changed.”
The same report added that there was “no clear change” in the stance of most banks, who still worry that money laundering-related risks – which must be absorbed by the bank in the case of a crypto exchange-bank partnership – represent a prohibitive “burden.”
Meanwhile, Newsway reported that Gopax could become a “dark horse” that could break the big four’s crypto monopoly. The same report added that the exchange was now set to obtain regulatory permission and begin offering KRW trading in the first half of 2022.
As Jeonbuk has relatively few branches, Gopax was quoted as stating that most bank account opening activities would likely need to be conducted online.
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