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The government of South Korea introduced the real-name system for cryptocurrency accounts in January this year. However, local news outlets have reported that only 40-50% of accounts at top four domestic crypto exchanges – Upbit, Bithumb, Coinone, and Korbit – have been converted into real-name ones.
In the wake of such low conversion rate, South Korean banks are now seeking to limit services for customers who are not using the real-name system, Bitcoin.com reported referring to local media sources.
“Under the new rule [real-name system], users who want to make cryptocurrency transactions must have a bank account under their real name at the same bank with cryptocurrency exchanges. Those who do not have their real-name account at the same bank will only be allowed to withdraw money from their existing bank account. To make new deposits, they are required to open a new bank account under their real name at the same bank with the exchanges,” South Korea’s Financial Services Commission (FSC) said in a press release dated January 23.
However, despite the government’s efforts “many investors do not convert to a real-name verified account but invest only with the funds they have already deposited [at crypto exchanges],” Bitcoin.com quoted from Money Today.
“Although the name verification service has been in operation [for] more than half a year since its inception, the conversion rate to the real-name verified accounts for each exchange site is only 40 to 50%,” the news source said.
A bank official told the news source that customers who continue to use anonymous crypto accounts are at higher risks of money laundering. The official said that banks are now urgently taking measures to boost the conversion rate.
“Banks will take measures to limit services unless they (customers with virtual accounts) switch to real-name verified accounts by a certain date. After a certain point in time, [if] new real-name verified accounts are not issued, some restrictions on the Korean won deposit / withdrawal will be considered,” the news outlet said, adding that the restrictions will be imposed as early as November.
Domestic crypto exchanges are also taking measures to encourage traders to switch to the real-name system. Bithumb has reportedly lowered the Korean won withdrawal limit by 10% for those accounts that have not converted and is considering additional measures. Upbit, on the other hand, held an event last month to give away a total of 100 million won to 100 users who converted within a specified time period.
