South Korean cryptocurrency traders must complete real-name verification this month, violators will face fines

The South Korean government announced that cryptocurrency traders will face fines if they continue to use virtual accounts for anonymous transactions. In addition, banks must complete the deployment of the new system as planned this month, regardless of whether they serve cryptocurrency exchanges.

Cryptocurrency traders face fines

South Korea’s financial authorities reportedly said on Sunday that cryptocurrency traders in the country will face fines if they refuse to switch from virtual accounts to real-name accounts.

Currently, local traders are able to trade anonymously using virtual accounts. However, regulators have banned banks from offering such accounts and required them to use a new system designed to ensure that all accounts are authenticated with real names and linked to corresponding cryptocurrency exchange accounts for deposits and withdrawals.

Cryptocurrency traders should upgrade their virtual accounts to real-name accounts within this month, and traders who refuse to undergo real-name authentication will face fines.

Virtual currency traders were told that if they refused to undergo real-name verification, their funds would be deposited into another account.

Currently, virtual accounts can only be used for withdrawals.

South Korea’s real-name financial transaction system began on August 3, 1993, and all financial transactions must be conducted under real names.

Before this, large financial transactions between individuals were conducted under pseudonyms or aliases. In 2014, the government amended the law, and offenders face up to five years in prison or a fine of 50 million won (about $47,000).

Although the report did not specify the amount of fines that cryptocurrency traders who violate the regulations will face, in 1993, those who violated the country's real-name financial transaction system regulations were required to pay 60% of their financial assets.

In addition, a government official stated:

We are currently developing a taxation plan for virtual currency transactions. Once the virtual currency real-name system is launched, we will be able to obtain individual trader data.

Banks must deploy new systems

Financial authorities have been inspecting six major domestic banks since last week to confirm whether their virtual account services are compliant with anti-money laundering regulations. The entire investigation was originally scheduled to end on January 11, but the regulator decided to postpone it to January 16. From a series of subsequent announcements, it can be seen that banks seem unwilling to comply with the new cryptocurrency regulations to deploy such real-name systems.

Shinhan Bank was the first bank to announce that it would not deploy the new system. The bank sent a notice to all exchange customers, including Bithumb, South Korea's largest cryptocurrency exchange, to inform them of its decision. Other banks also plan to follow Shinhan Bank's lead and deliberately delay the deployment of the real-name system.

However, last week, the government and representatives of six banks met and asked them to deploy the real-name system as scheduled, regardless of whether they decide to continue to serve cryptocurrency exchanges. A financial official said:

Even if virtual currency transactions are illegal, a real-name authentication system needs to be introduced.