A blockchain-based software developer was recently rejected by a bank regarding opening of a corporate account. This bank, which manages blacklist companies that deal with cryptocurrency, was notified that this software developer is registered as a ‘business that handles with cryptocurrency’. Although this software developer argued that it is a software company, it could not open its corporate account at the end.
Another company that holds blockchain InsurTech technologies could not open its corporate account even after visiting two banks. It was categorized as a company that is preparing for ICO (Initial Coin Offering), and this made banks believe that this company may correspond to South Korean Government’s anti-money laundering issue.
Recently, there have been many incidences where blockchain-based companies are rejected by banks from opening corporate accounts.
Blockchain Startup Association has been sending complaints to The Korea Federation of Banks (KFB) regarding rejection of opening of corporate accounts. Some companies think that this is an illegal act by banks and have started to discuss about possible measures that they can take.
According to industries, banks have been rejecting blockchain-based companies from opening corporate accounts without any inspection.
Some are criticizing the fact that AML (Anti-Money Laundering) measures that were set up by South Korean Government and Korea Financial Intelligence Unit (KOFIU) are applied excessively on normal blockchain companies. Some are testifying that normal startup companies and small and medium companies that do not handle cryptocurrency are stigmatized as blockchain-based companies. As a result, there have been increased incidences where even normal small and medium companies are rejected from opening corporate accounts.
Companies that were rejected complained by calling KFB directly. They asked KFB whether it ordered banks to stop issuing corporate accounts to blockchain-based companies and requested a meeting with KFB. KFB, in turn, responded by saying that it did not order banks not to give out corporate accounts to blockchain-based companies.
“Although we requested to open a corporate account from Woori Bank and KB Bank, we were told that we could not open a corporate account as we are registered as a company that handles cryptocurrency.” said CEO of a different blockchain software developer.
According to guidelines related to AML, banks must carry inspection on companies whether they handle cryptocurrency trades. However, there were not any inspection done on these corresponding companies.
Although Blockchain Startup Association requested improved measures from KFB, it said that it did not hear back anything meaningful from KFB.
It seems that most of banks become overly sensitive even when they hear ‘bl’.
Banks are stating that they feel victimized.
“There is a checklist according to AML and there is a growing sentiment about not providing any kind of service to blockchain-related companies.” said a high-ranking official of a large bank who requested anonymity. “Although cryptocurrency exchanges were initial targets, banks have no choice since many companies’ funds are related to exchanges or are planning on ICO (Initial Coin Offering) in the near future.”
Banks are responding by saying that it is troublesome for workers to frequently check and manage many checklists ordered by government authorities whenever banks approve companies that are categorized as blockchain-based companies with opening of accounts.
Situation is even worse with local branches as some of them even set up internal regulation that orders workers not to deal with companies that are categorized as blockchain-based companies at all.
Recently, a small and medium company received a call from a bank that it will suspend the company’s account within a week as the company is categorized as a blockchain-based company. “Team Leader of a bank that we deal with suddenly asked me whether we are pushing for a cryptocurrency exchange or received a confirmation from South Korean Government.” said a CEO of the corresponding company. “We were told that they have no choice but to suspend our account if we do not tell them detailed information.”
As public opinion that believes that rejecting blockchain-based companies from opening corporate accounts is a problem continues to get stronger, some groups are discussing about ways to send such old conditions to financial authorities and to request improvement or revision of these old conditions.
Staff Reporter Gil, Jaeshik | osolgil@etnews.com