Cryptocurrency exchange platform, Bithumb, has decided to stop issuing new virtual accounts after 1st August, 2018. Customers who already have virtual accounts can use them for deposit and withdrawal services. For the Bithumb customers, virtual accounts are needed to deposit or withdraw Korean won
The decision was made after the repeated failed attempts of the platform to renew their contract with a bank.
Bithumb didn’t renew its contract with Shinhan Bank when it was terminated. But it sought to renew its contract with NH Nonghyup Bank which was rejected.
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),” the official added.
Bithumb also had a contract with Shinhan Bank for the real-name service but it was terminated due to increased risks from multiple security breaches, Shinhan previously explained. Bithumb has been suspected of tax evasion and poor business practices by a number of agencies in the past, but was cleared by the National Tax Service in early June.
Bithumb made rounds in the news world in June this year when it became the target of a crypto heist of a staggering 35 billion won. Security measures that cost Bithumb almost $9 million dollars annually were compromised which resulted in a halt for all trading. Members were notified to immediately discontinue depositing their passwords. Although Bithumb confirmed it will pay back victims using its own reserves, the market was in disarray and BTC value dipped by 200$ in mere hours after the heist.
The bank has given Bithumb a one-month grace period. During this time, it will continue to provide deposit and withdrawal services for existing accounts. However, the publication noted that “it will become difficult to use existing virtual accounts if the contract renewal is finally terminated.”
The spiraling downfall started for Bithumb when Kookmin Bank, the biggest financial institution in South Korea, decided not to support cryptocurrency exchanges and provide virtual bank accounts to cryptocurrency investors.
As per new Korean regulations, cryptocurrency exchanges are required to establish partnerships with banks and virtual accounts can only be used for trading if they are backed by a KYC-attested bank account. Also, cryptocurrency exchanges are required to renew their contracts with banks every six months.
Bithumb currently ranks as South Korea’s largest cryptocurrency exchange by trading volume, according to Coinmarketcap.
Now, 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.
The silver lining to this face-off is an official quote from Bithumb that 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.