April 25, 2024

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[THE INVESTOR] South Korea is expected to step up its crackdown on any misdeeds involving cryptocurrencies trade this week, while the nation remains at odds over how to address overheated markets that critics say are hotbeds of crimes.

According to sources on Jan.14, the Financial Services Commission is drawing up plans to impose penalties against cryptocurrency investors who refuse to verify their identities.

Those that refuse to comply with verification or a business entity that fails to install the verification system on cryptocurrency transactions will be subject to “various penalties,” they said. 

The consequences will be similar to fines in 1993 imposed on those failing to abide by a real-name banking system, according to the sources.

Holders of existing accounts that refuse to verify their identification would also only be able to withdraw their money while depositing would be banned. Cryptocurrency exchanges will also be banned if they are traded through corporate accounts with scores of users’ virtual accounts attached. Such corporate accounts, locally dubbed “beehive accounts,” are viewed to be susceptible to money laundering and hacking attacks.

These and other guidelines are expected to be officially unveiled after the financial authorities complete a joint inspection on commercial banks by the intelligence unit of the FSC and the Financial Supervisory Service on Tuesday.

Since mid-December, Korea has been moving to allow cryptocurrency transactions only through real-name accounts provided by local banks last month.

However, amid negative public sentiment over various cryptocurrency measures, some commercial banks are postponing the plans. On Jan.12, Shinhan Bank put on indefnite hold plans that were to take effect that day. While it has finished developing the system, the bank decided to hold it off on “growing controversy in society” surrounding cryptocurrencies.

Nonghyup Bank is also said to be taking a wait-and-see approach until a detailed guideline from the government is announced.

On Jan.11, the presidential office of Cheong Wa Dae denied Justice Minister Park Sang-ki’s hints of an all-out ban on cryptocurrency trade, hours after his remarks were made. Finance Minister Kim Dong-yeon said the matter “needs consultations” in a “balanced perspective.”

The confusion triggered a rollercoaster ride of cryptocurrency prices here, while the phenomenon of the “Kimchi premium,” referring to the extraordinarily high trading price in Korea compared to the world’s average, still lingered.

Amid the confusion, there is growing backlash against the plan to carry out a ban on trade here.

An online petition posted on the Korean presidential office’s website in December demanded that the government change its “anti-cryptocurrency stance.” It had drawn nearly 170,000 names, as of 1 p.m. on Jan.14.

By Son Ji-hyoung/The Korea Herald (consnow@heraldcorp.com)