A South Korean district court has ruled that Nonghyup Bank, a major bank in the country, cannot block transactions to the account of cryptocurrency exchange Coinis based solely on the government’s anti-money laundering guidelines. This is reportedly the first time a Korean crypto exchange has taken legal action against a bank for blocking its transactions.
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Court Sided With Crypto Exchange
The 50th Civil Affairs Division of the Seoul Central District Court has ruled in favor of cryptocurrency exchange Coinis against Nonghyup Bank, local media reported.
The exchange filed a complaint with the court seeking to prohibit the bank from suspending its transactions after deposits to its account were blocked by the bank last month. Nonghyup Bank cited the Virtual Currency Anti-Money Laundering (AML) Guidelines set by the country’s Financial Services Commission (FSC) as its reason.
The court ruled on Monday that it is illegal for the bank to suspend the exchange’s transactions based solely on the FSC guidelines and moved to dismiss the suspension. Zdnet elaborated:
It is the first time that a cryptocurrency exchange has responded to bank suspension measures and has taken legal action.
Kim Tae-lim, a lawyer connected to the case, explained that Nonghyup Bank breached the contract with Coinis since the exchange “has the right to freely deposit and withdraw money in the account in accordance with the deposit agreement entered into between the bank and the exchange,” the Digital Daily detailed. Kim was further quoted by the publication:
This case is significant in that it is a decision to point out that indiscriminate regulation against a virtual currency exchange should be avoided in the absence of legal grounds.
Bank Losing Ground
The South Korean government introduced the real-name system for crypto exchanges in January with the aim to convert all accounts at crypto exchanges into real-name-verified ones. This system is part of the regulators’ anti-money laundering measures.
However, only four exchanges in the country are using the system: Bithumb, Upbit, Coinone, and Korbit. Banks have refused to provide the real-name conversion service to the rest of the exchanges. Coinis, therefore, continued to use its corporate account to accept customer funds. Banks claim that crypto exchanges that are not using real-name accounts are at high risk of money laundering.
Nonghyup Bank is currently providing the real-name conversion service for Bithumb and Coinone. In August, Bithumb suspended opening new virtual accounts due to a disagreement with the bank. In September, both Bithumb and Coinone announced that they were terminating fiat withdrawals for unverified crypto traders as requested by Nonghyup Bank.
Money Today elaborated:
The bank has been using the [AML] guidelines for ‘closing the transaction’ to pressure virtual currency trading sites for investor protection measures and anti-money laundering schemes and to encourage them to use real name verified accounts.
The news outlet noted that previously crypto exchanges have had to comply with the bank’s requests, adding that Coinis’ victory is likely to remove some pressure from exchanges.
What do you think of the court ruling in favor of a crypto exchange against a bank? Let us know in the comments section below.
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