On October 30, Seoul Central District Court ruled in favor of a local crypto exchange in a legal battle between Coinis and Nonghyup, one of the largest commercial banks in the country.

In September, Nonghyup unilaterally announced the termination of its banking partnership with the local exchange, disallowing the company from processing deposits and withdrawals with the bank.

In response, the exchange filed a request to end the suspension of deposits with the Seoul Central District Court in an attempt to restore the relationship with the bank.

Court Rules in Favor of the Exchange

This week, the Seoul Central District Court officially ruled the case in favor of Coinis and stated that the suspension of deposits and withdrawals imposed by Nonghyup against the crypto exchange was not fair.

Attorney Kim Tae-rim, who represented Coinis in the case, emphasized that the decision of the court to lift the suspension on the crypto exchange demonstrates that banks cannot unilaterally terminate services to businesses based on the guideline established by the Financial Services Commission (FSC).

“Cryptocurrency exchanges, by default, have the right to freely deposit and withdraw funds to and from major banks in South Korea, and an abrupt termination of partnership and services by the bank [in this case Nonghyup] without sufficient evidence or reasoning falls under the breach of contract,” the attorney said.

The complaint filed by Coinis against Nonghyup, which was accepted by the Seoul Central District Court, is the first case in which a local cryptocurrency exchange challenged a major bank for mistreating cryptocurrency-related businesses.

Attorney Kim explained that the case will establish a precedent for the industry, as it will lead banks to be increasing cautious in ending relationships with cryptocurrency exchanges without legal basis or sufficient evidence to prove a breach of contract.

Previously, Nonghyup also declined a partnership with Bithumb, the second largest cryptocurrency exchange in the country behind Upbit. But, at the time, analysts stated that the decision of Nonghyup to delay the deal between the bank and Bithumb was justified due to the two consecutive security breaches Bithumb suffered.

In September, Nonghyup signed a deal with Bithumb to process deposits and withdrawals on behalf of the exchange.

“Bithumb is now able to issue virtual bank accounts for new users after a partnership has been established with NH Bank. Bithumb will continue to comply with the bank’s guideline strictly while cooperating with the government to create a transparent and robust market for local investors,” a Bithumb representative said at the time.

State of the Crypto Exchange Market of South Korea

Recently, Bithumb eliminated all banking options on its exchange apart from Nonghyup, its sole banking partner. Meanwhile, Upbit and Gopax, licensed cryptocurrency exchanges financed by Kakao and Shinhan Bank, the country’s largest internet conglomerate and commercial bank, are continuing to process deposits and withdrawals from and to all local banks.

The infrastructure of the cryptocurrency exchange market of South Korea is strengthening rapidly, with the support of the government towards small businesses and minor crypto trading platforms.

Photo by Saveliy Bobov on Unsplash