Last week, a breakthrough banking deal was made that gave hope to a group of South Korean exchanges of getting permission to resume their crypto-to-fiat trading activities. However, there are different opinions as to whether the 23 exchanges that have been restricted to crypto-to-crypto services will be able to escape before their financial pressures overwhelm them. Last week, a crypto exchange by the name of Gopaxstruck a deal with a commercial bank, which would permit it to resume crypto-to-fiat trading, as long as regulatory approval is granted. This makes it the first non-‘big four’ crypto exchanges in South Korea, which are Korbit, Coinone, Bithumb and Upbit, to do so.
Gopax has made a deal with a newer, regional bank by the name of Jeonbuk Bank. As for the big four crypto exchanges in South Korea, they have also signed deals with some larger commercial banks and this allows them to continue offering crypto-to-fiat services to their clients. In these cases, the banks have to provide the customers of the exchange with linked and real-name verified accounts and monitor them for possible money laundering activities. Last year in September, a number of medium-sized and small exchanges had been forced to shut down their operations, or had to reach out to a government agency for obtaining Information Security Management System (ISMS) certification.
Otherwise, they had to eliminate fiat trading options from their platforms in order to comply with regulatory measures. These exchanges have found themselves in a rather perilous situation because most banks were unwilling to enter into a deal with them. However, they now have some hope after the news announced last week. According to a report, three of the largest crypto-to-crypto exchanges in South Korean, which are Huobi Korea, Hanbitco, and GDAC, could resume their KRW market activities.
The report stated that these exchanges were negotiating with banks and gearing up to issue real-name verified accounts. A senior employee at one of the competitors of the Gopax exchange said that trading platforms were a bit optimistic, as they had been speaking to domestic banks. A blockchain consultant, Mira Kim said on Monday that it was unlikely for larger commercial banks to agree to make deals with exchanges because they are risk-averse. But, she said that smaller banks, operating on the same scale as Jeonbuk Bank, were more likely to come up with solutions for working with crypto exchanges.
Kim went on to say that regional banks and neobankswere taking an interest after they had seen the success of the deal between Upbit and another newer bank, K-Bank, last year. According to Kim, the smaller banks consider crypto exchanges as a potential way of expanding their customer base to include younger people. While they are interested, they cannot deny the risks. The problem is that most banks have not changed their stance when it comes to money laundering risks, which the bank would have to absorb if a partnership is made between a crypto exchange and bank and they are not willing to carry the burden.