The South Korean government has announced that cryptocurrency traders will be fined if they do not convert from existing virtual accounts, which allows for anonymous trading, to real-name accounts. Regardless of their service levels to crypto exchanges, banks have been ordered to implement the new system this month as planned.
Crypto Traders Facing Fines
The South Korean financial authorities said on Sunday that cryptocurrency traders in the country “will be fined for refusing to convert their virtual accounts into real-name ones,” Yonhap reported.
Currently, crypto traders are able to trade anonymously by using virtual accounts. However, the authorities have banned banks from issuing new ones and mandated them to install the new system “that ensures only real-name bank accounts and matching accounts at cryptocurrency exchanges to be used for deposits and withdrawals,” the news outlet detailed, adding that:
Cryptocurrency traders will be allowed to convert their virtual accounts into real-name ones within this month, but those who refuse to accede to real-name identification will face fines.
“People who have traded virtual currency have been told that if they refuse to check their real name, they will be penalized for depositing into an existing account,” the Kyunghyang Shinmun elaborated. Only withdrawals will be allowed from existing virtual accounts.
South Korea first enforced the Real Name Financial Transaction System on August 3, 1993, forcing all financial transactions to be conducted under real names.
Until that time, financial transactions of large amounts between private parties were often conducted under false names or pseudonyms. In 2014, this law was revised and penalties of imprisonment of up to five years or a fine of 50 million won (~USD$47,000) were introduced.
While the amount of the fine has not been determined for violations by cryptocurrency traders, Yonhap pointed out that “In 1993, violators of the country’s real-name financial transaction system were slapped with fines amounting to 60 percent of their financial assets.”
Furthermore, Chosun quoted a government official saying, “Currently, we are establishing a taxation plan for virtual currency transactions centered on the accounting department. If a virtual currency real name verification system is introduced, we will be able to obtain data on individual traders.”
Banks Must Install the New System Regardless
The financial authorities started inspecting 6 major Korean banks at the beginning of last week for their anti-money laundering compliance related to virtual account services. The inspection was supposed to end on January 11 but the authorities decided to extend it to January 16. Following the extension announcement, banks became reluctant to implement the real-name system as mandated by the cryptocurrency regulation.
Shinhan Bank was the first to announce its decision not to implement this new system. The bank immediately sent a letter to each exchange it currently provides virtual account services to, informing them of its decision. Among them was Bithumb, South Korea’s largest cryptocurrency exchange. Following Shinhan’s move, other banks were also reportedly ready to follow suit and delay the implementation of the real-name system.
However, on January 13, the government held a meeting with representatives of the 6 banks and asked them to implement the new real-name system as planned, regardless of whether they decide to service crypto exchanges or not. A financial official was quoted by Hankook-Ilbo:
Even if virtual currency transactions are entirely illegal, the real name verification system needs to be introduced by itself.
Following the government’s instruction, banks reportedly agreed to implement the new system as planned.