Binance KR won the dispute with WooriBank on the matter of corporate ‘honeycomb’ accounts. Banks never seemed to win the battles when it came to conflicts regarding accounts, however, this might change after the Special Act comes into effect.
On the 18th, the court ruled in favor of the exchange Binance KR. The court decided that the accounts created by Binance KR does not fit the criteria of reasons to terminate the financial transactions since it does not seem to involve any risk of money-laundering and Binance KR gave a notice of handling the cryptocurrency with the account. Based on the ruling, Binance KR may continue taking their customer’s deposit in their corporate ‘honeycomb’ account.
This is not the first time the court ruled in favor of the exchanges. The court ruling referenced the times when Coinis, Bitsonic, VENTASbit requested a termination on the suspension of banking transactions last year and won the case. In particular, Coinis won the appeal last year in regards to Nonghyup Bank’s protest, which consequently showed that the bank’s claims were insufficient.
At that time, the court noted that “it seems clear that the bank didn’t even provide an opportunity to process the real-name verification process on withdrawal account services, even though there was a clear intention to use it,” and that “it seems unreasonable to only focus on the purpose of the regulations without the careful consideration, since the operations and overall regulations of cryptocurrency exchanges are still being discussed.”
The Financial Services Commission’s guideline for suspending the financial transactions of honeycomb accounts is based on the prevention of money-laundering related to cryptocurrency. According to the guideline, the bank may terminate or refuse the account transactions ▲if the customer declines to provide an information for identification, or ▲if the information provided by the customer for identification is unreliable and therefore considered equal to refusal to provide the information, or ▲when the exchange does not use the real-name verification services for their withdrawal accounts.
Therefore, the court decided it was unreasonable to assume the Coinis account was to be used for money laundering. It is important to note that the court ruling indicates guidelines of Financial Services Commissions are not legally binding. Indeed, the administrative orders that are not considered emergency must be implemented in accordance with relevant financial laws, but the guidelines of the Financial Services Commission don’t seem to be based on any. In the end, the court ruled in favor of Coinis because “the guidelines does not have any legal effect, therefore the bank’s notice of account suspension does not have any legal base.”
However, all might change once the Special Act comes into effect. According to the Act, the bank can decline to open an account if the exchanges do not meet the criteria of requirements for issuing a real-name verification serviced account, and the requirements are are to be detailed in the Special Act. The exchanges that do not meet the requirements of account cannot report to the Financial Intelligence Unit (FIU) and will be unable to operate their transactions under the honeycomb account.
What the exchange companies are expecting is a decision to ease the requirements that are needed to issue a real name verification accounts. At this time, only ▲Bithumb, ▲UpBit, ▲Coinone, ▲Korbit were able to open the verified accounts but this might change once the Special Act is announced. This is also why other exchanges are doing their best to obtain theirs.
The Special Act might be able to solve this ‘honeycomb’ account issue, but if the exchanges were to keep their businesses going, they need to overcome the issue of ISMS(Information Security Management System). Only 6 of the domestic exchanges have obtained the ISMS so far, and it is expected to be even harder for foreign exchanges. An industry representative mentioned that “if the foreign exchange company shares its overbook with the head office, obtaining the ISMS certification can be very difficult” and added that “there may not be many exchanges that survive after the Special Act.”