Several South Korean Banks May Close Down The Accounts of Bitcoin Traders

The move cuts off a critical piece of Korean crypto infrastructure. Traders there typically fund their exchange accounts through a system where banks issue virtual accounts tied to specific platforms. When someone transfers money from their Woori Bank account to Bithumb, for instance, Bithumb generates a virtual bank account backed by Woori where the funds sit until the user invests in crypto. Starting in January, that system disappears for the big three. Industrial Bank of Korea, another major player that's served these exchanges since 2016, will also halt new account openings by year's end.

The pullback follows the South Korean government's regulatory push. On December 13, a task force including the Ministry of Strategy and Finance, Financial Services Commission, Ministry of Justice, Fair Trade Commission, and Financial Supervisory Commission convened to chart a new course for the country's crypto markets. The participating agencies and the central bank agreed to tighten oversight, a step that validates the sector, something officials had previously resisted because of losses from failed ICOs and Ponzi schemes during 2017.

Two days later, on December 15, the government formalized its position. It instructed banks and financial institutions to prevent minors and foreign nationals from opening cryptocurrency trading accounts. One of four regulatory frameworks the government released stated: "Request banks and exchanges to ensure underaged investors and foreigners cannot open trading accounts on cryptocurrency exchanges."

Woori and IBK aren't the only banks in the country capable of handling crypto exchange volumes. Shinhan Bank, the largest commercial bank in South Korea, has supported the sector since January and is now testing a cryptocurrency wallet and vault system slated for 2018. A Shinhan spokesperson told Naver: "Shinhan is testing a virtual bitcoin vault platform wherein the private keys of bitcoin addresses and wallets are managed and issued by the bank. The bank intends to provide the vault service for free and charge a fee for withdrawals." If Woori and IBK exit, platforms like Korbit, Coinone, and Bithumb can shift their operations to institutions like Shinhan willing to support the business.