A court in South Korea has ruled that the decision by a commercial bank to stop offering banking services to a cryptocurrency exchange was unlawful and must, therefore, be rescinded.
According to the Central District Court’s 50th Civil Affairs Division, the move by South Korean commercial bank Nonghyup to cease offering deposit and withdrawal services to Coinis cryptocurrency exchange was both unfair and illegal. The South Korean bank had claimed that it based its decision on the anti-money laundering guidelines issued by the regulator Financial Services Commission (FSC), according to a report by Zdnet Korea.
Per a lawyer for the plaintiff, the move by the bank to stop providing banking services to the crypto trading platform constituted a breach of contract. This is because the two parties already had a business agreement that the bank flouted.
While Nonghyup’s action has now been ruled unlawful, it was not completely out of the blue especially given that the South Korean commercial bank had been a target of regulators in the recent past with regards to its business relationships with cryptocurrency trading platform.
At the beginning of the year, commercial banks providing banking services to cryptocurrency exchanges in the Asian country came under increased scrutiny from regulators intent on cracking down on speculative trading and money laundering and Nonghyup featured prominently among the six banks that were set to be investigated. The others were Korea Development Bank, Industrial Bank of Korea, Shinhan Bank, Kookmin Bank, and Woori Bank.
Three months later Nonghyup was also among three banks that the Financial Services Commission and the Korea Financial Intelligence Unit indicated would undergo on-site inspections with regards to the services they offered cryptocurrency exchanges. Just like in the earlier investigation, this one was being conducted to ensure that the financial institutions were adhering to the Know-Your-Client and Anti-Money Laundering rules. The two other banks were Hana Bank and Kookmin Bank.
Coinis is not the first South Korean crypto exchange to experience fallout with Nonghyup Bank though. Three months ago, the South Korean commercial bank declined to renew a contract with the Bithumb cryptocurrency exchange. This was two months after the exchange had been hacked and cryptocurrencies worth approximately US$30 million stolen from a hot wallet.
At the time, Nonghyup claimed that its reason for not renewing the contract was laxity on the part of Bithumb.
“We have decided not to renew the contract because Bithumb still has problems in protecting consumers and information and preventing money laundering,” an official of the bank was quoted saying as CCN.com reported.
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This article was edited by Jonas Borchgrevink for CCN.com. If you see a breach of our Code of Ethics or Rights and Duties of the Editor, or find a factual, spelling, or grammar error, please contact us and we will look at it as soon as possible.
Last modified: July 2, 2020 11:53 PM UTC