Bithumb, one of South Korea's four biggest cryptocurrency exchanges, will stop issuing new virtual accounts from August as it has failed to renew a contract with NH Nonghyup Bank.
According to investment banking (IB) industry sources on July 31, Bithumb has decided to temporarily stop issuing new real-name virtual accounts from August 1. However, customers who already have virtual accounts can use them for deposit and withdrawal services.
Bithumb didn’t renew its contract with Shinhan Bank when it was terminated. But it sought to renew its contract with NH Nonghyup Bank. However, the bank turned down the request. An official from Nonghyup Bank said, “We have decided not to renew the contract because Bithumb still has problems in protecting consumers and information and preventing money laundering.” The bank thinks that Bithumb’s data processing systems have flaws in light of the recent hacking incident, which caused the exchange a loss of 18.9 billion won (US$16.88 million).
In this regard, an official from Bithumb said, “We have a consensus with Nonghyup Bank on renewal of the contract. We are planning to iron out our different views on some legal expressions and start issuing virtual accounts soon.” However, market experts say that deposit and withdrawal of money through virtual accounts of commercial banks is highly likely to be completely blocked as Nonghyup Bank remains firm on its stance. In this case, Bithumb can run the trading site through a collection account called “hive account” but investors will suffer much inconvenience.
Bithumb is the only cryptocurrency exchange among the big four that has failed to renew its contract with commercial banks on issuing virtual accounts. Nonghyup Bank has renewed the contract with another exchange Coinone. Upbit has renewed its contract with the Industrial Bank of Korea, while Korbit has concluded a contract with Shinhan Bank.
Meanwhile, the real name verification service for cryptocurrency transactions was introduced by the government in January in order to uproot cryptocurrency speculation and improve market transparency. At that time, the government forced cryptocurrency exchanges to renew the service contract with banks every six months in a bid to encourage them to make continuous efforts to prevent money laundering.