The latest news emerging from South Korea indicates that Bitcoin exchanges are facing a surprisingly increased level of scrutiny of commercial banks amid the renewal of banking services. The revelation comes as the intergovernmental Financial Action Task Force (FATF) continues to urge countries to enact stricter regulatory controls over the crypto industry. This according to a report from The BChain, July 29, 2019.
Banks Apply AML Pressure
The ‘big four’ Bitcoin exchanges in South Korea — Upbit, Korbit, Bithumb, and Coinone, aren’t finding the renewal of banking services process to be the usual breeze. According to a report by local media platform BChain, commercial banks are demanding stricter anti-money laundering (AML) controls from these exchanges as a prerequisite for continuation of banking services.
Reports indicate that the increased scrutiny is because of the recent FATF guidelines which called for more AML compliance from crypto businesses. Before the emergence of the new FATF guidelines, the ‘big four’ could reportedly renew their banking access every six months with hardly a hitch.
Commercial banks in South Korea are also demanding these strict AML compliance measures as a way of protecting themselves from litigation. FATF guidelines make banks legally liable in any case of money laundering involving cryptocurrency exchanges.
Earlier in the year, Bithumb was part of a group of five exchanges to agree to full compensation in the event of users losing their funds. This move applied to both instances within and outside the control of these platforms.
This move by Korean banks is part of increasing global scrutiny on crypto-businesses. Some stakeholders have even called on authorities to strike a balance between creating robust laws and allowing digital innovation.
More Shut Downs Ahead?
The emergence of stricter AML controls for Bitcoin exchanges also comes with additional cost burden for these platforms. Speaking to The BChain, an anonymous official of one the exchanges in the country said:
“In order to meet this standard, small and medium-sized trading sites that lack operating costs are likely to disappear from the market.”
As reported by BTCManager back in April, Coinnest has been forced to shut down its operations due to what it called challenging market conditions in the country. This new move banks might cause even more platforms to go out of business.
In 2018, only one of the big four managed to post a profit. Bithumb’s losses even dwarfed the two other exchanges that ended the year in the red, signaling a problem for the crypto trading market in South Korea.