Due to stringent financial regulations, South Korean universities face challenges in cashing in on donated cryptocurrencies. Despite receiving significant crypto donations, these institutions cannot convert these assets into cash, hindering their ability to use them effectively.
Local media report that several South Korean virtual asset businesses have donated self-issued cryptocurrencies to universities. However, financial authorities have imposed restrictions that prevent universities from opening corporate accounts necessary for crypto transactions.
Financial Authorities to Advise University Avoiding Crypto Donations
An official from the Korean Financial Intelligence Unit (KOFIU) under the Financial Services Commission (FSC) explained that the Ministry of Education and KOFIU are unlikely to permit universities to open corporate accounts for crypto transactions. This decision follows university requests seeking approval to convert large crypto donations into cash.
Universities need a real-name account at a virtual asset exchange to convert donated cryptocurrencies into Korean won. However, local financial authorities have instructed banks not to issue such accounts to domestic corporations and institutions. They are concerned that corporate accounts under a corporate name may not qualify as real-name accounts, posing a high risk of money laundering.
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While the Act on Reporting and Using Specified Financial Transaction Information does not explicitly prohibit corporate accounts, financial authorities restrict them to certain government agencies for public interest purposes.
“After discussions with relevant ministries, including the Ministry of Education, we have decided not to allow universities to open corporate accounts. Allowing it only for universities would create issues of fairness with other corporations, and permitting it for all corporations would pose too high a risk of money laundering,” a senior Korean financial authority official stated.
The concern arises from the ease with which corporations can be established and dissolved in Korea. This increases the risk of shell corporations laundering illicit funds through crypto-to-cash conversions. Moreover, the crypto’s highly volatile nature could negatively impact the financial stability of businesses involved in such transactions.
In light of these concerns, financial authorities and the Ministry of Education plan to advise universities against accepting crypto donations in the future. However, depending on specific conditions, they consider an exception for converting previously received donations into cash. This pathway could help universities manage crypto donations that have already been received.
This development follows a revision of the Donation Act earlier this month. The revision expands the types of assets citizens can donate to charities. However, despite the country’s growing popularity of digital assets, cryptocurrencies like Bitcoin remain excluded from the donation scope.
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According to a recent KOFIU report, South Korea’s crypto user base increased by 390,000 in 2023, reaching a total of 6.45 million users. The average daily trading volume in the country also rose to 3.6 trillion won, a 24% increase from the first half of the year.
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