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South Korea inspects six banks over virtual currency services to clients

Reuters  |  SEOUL 

By and Dahee Kim

SEOUL (Reuters) - South Korean financial authorities on Monday said they are inspecting six local banks that offer accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime.

The joint inspection by the (FSC) and (FSS) will check if banks are adhering to anti-laundering rules and using real names for accounts, FSC told a press conference.

The six banks named by the regulator have all provided accounts to clients that handle cryptocurrencies, according to the FSC. The banks are NH Bank, Industrial of Korea, Shinhan Bank, Kookmin Bank, Woori and

Choi said the inspections are intended to provide guidance to banks and are not the result of any suspected wrongdoing.

"is currently unable to function as a means of payment and it is being used for illegal purposes like laundering, scams and fraudulent investor operations," said Choi.

"The side effects have been severe, leading to hacking problems at the institutions that handle cryptocurrency and an unreasonable spike in speculation."

A Woori told the was filling out a checklist for the inspection. The said Woori had stopped providing last month as the costs of using a real-name transaction system were too prohibitive.

NH and Shinhan representatives declined to comment, while the other three banks could not immediately be reached for comment.

Choi said authorities are also looking at ways to reduce risks associated with cryptocurrency trading in the country, which could include shutting down institutions that use such currencies.

Last month, the government said it would impose additional measures to regulate speculation in cryptocurrency trading within the country, including a ban on anonymous cryptocurrency accounts and new legislation to allows regulators to close virtual coin exchanges if needed.

and other virtual coins have been extremely popular in South Korea, drawing wide investments from housewives and students. Government officials have expressed concern over frenzied speculation, with South Korea's central warning of "irrational exuberance" in trading of last month.

A South Korean cryptocurrency exchange, Youbit, shut down and filed for bankruptcy in December after it was hacked twice last year, highlighting security and regulatory concerns.

South Korea's exchanges have been more vulnerable to hackers as trades at higher rates on local exchanges than they do elsewhere. As of 0710 GMT, bitcoin's global price average was trading at $16,294 while in South Korean markets, it stood at 25 million won, or $23,467.35, according to

South Korea's prices are higher because of the extreme popularity of the in the country, with buyers greatly outnumbering those willing to sell, said Park Nok-sun, a at & Securities.

The fact that some of the most active exchanges in the world are in also makes the country an attractive target for hackers, he added.

Choi warned on Monday authorities would crack down on crime and dole out heavy punishments on those who partake in market price manipulation, pyramid schemes and laundering.

"No one knows what is going on at these places that handle cryptocurrency because there is no direct regulation system in place regarding these institutions," Choi said.

($1 = 1,065.3100 won)

(Reporting by and Dahee Kim; Editing by Sam Holmes)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 08 2018. 13:53 IST