Two of the most significant cryptocurrency exchanges in South Korea have been forced to switch their account operation services to another bank in the country.
As per local news sources, the announcement came to light after Kookmin Bank recently decided to stop providing services for virtual cryptocurrency accounts. It is being reported that the decision by Kookmin Bank was taken due to its internal approach to the situation.
This comes in the wake of recent announcements by the South Korean government regarding the operations of such accounts.
How will these accounts be used?
The cryptocurrency exchanges in South Korea facilitate transactions for their customers through virtual cryptocurrency accounts.
The government had recently expressed its reservations on the way these accounts were operated largely due to their anonymity and insufficient tracking of user activity. These findings were shared by the government after it conducted checks on 6 of such banks that offered these accounts.
These recent occurrences have caused great consternation in the cryptocurrency sector across the world.
Now, the government has directed these exchanges and banks to employ measures to track user data efficiently.
According to reports, the government has asked exchanges to share users’ transaction data with banks as well to eliminate the anonymity that had been identified earlier. Opening anonymous cryptocurrency accounts is also prohibited by the government.
In the place of that practice, banks will be implementing processes to maintain real-name cryptocurrency accounts which can be verified with user data.
It was also mentioned that any foreign national, whether they reside in South Korea or not, will not be allowed to deposit South Korean Wan at any cryptocurrency exchange once the new policies go into effect.
Effective for tax tracking and anti-money laundering
While the past couple of weeks have been difficult for the South Korean cryptocurrency industry given the looming uncertainty, these new announcements have provided some level of relief as they show that the government is not banning cryptocurrency exchanges altogether, but is only looking to put forth regulations for taxation and anti-money laundering.
That makes sense as well since the amount of revenue that these cryptocurrency exchanges generate makes them applicable for more than 24 percent of income tax.
As per South Korean income tax laws, any corporations that generate an income of more than 20 billion KRW (approximately $1.8 million) falls under corporate taxes of more than 22 percent.
Given that South Korea holds some of the world’s largest cryptocurrency exchanges, it is no surprise that some of them have significant turnover figures, with Upbit reporting a turnover of $4 billion, Bithumb with $3.93, and Coinone with $455; which makes the taxes above applicable on them.
Eliminating anonymous transactions will allow the government to have effective means to track taxes by individuals as well, while also taking care of anti-money laundering within its territory.
These regulations come as a sigh of relief
Even though some of these regulations such as the restriction on foreign residents is causing a stir within the cryptocurrency community, it is still relieved to hear of these regulations instead of the rumored ban that had been looming over the South Korean cryptocurrency industry as of late.
It remains to be seen how the government will proceed further with these regulations, but for now, this news does provide a sense of stability in the midst of the precarious experiences of the past couple of weeks.