Regulation
Regulatory hurdles for university crypto donations in Korea
Due to strict financial regulations, South Korean universities face difficulties in cashing out donated cryptocurrencies. Despite receiving large cryptocurrency donations, these institutions cannot convert these assets into cash, hampering their ability to use them effectively.
Local media reports that several South Korean virtual asset companies 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 advise the university to avoid cryptocurrency donations
An official from the Korea Financial Intelligence Unit (KOFIU) under the Financial Services Commission (FSC) explained that the Ministry of Education and KOFIU are unlikely to allow universities to open corporate accounts for crypto transactions. This decision follows university requests seeking approval to convert large cryptocurrency donations into cash.
Universities need a real 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 companies and institutions. They worry that business accounts under a business name may not qualify as real-name accounts, posing as a high risk of money laundering.
To know more: How to donate cryptocurrencies using The Giving Block
Although the Law on Reporting and Use of Specific Information on Financial Transactions does not explicitly prohibit corporate accounts, financial authorities restrict them to certain government agencies for purposes of public interest.
“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 fairness problems with other companies, and allowing it for all companies would pose too high a risk of money laundering,” said a senior official from the Korean Financial Authority. declared.
The concern arises from the ease with which corporations can be formed and dissolved in Korea. This increases the risk of shell companies laundering illicit funds through cryptocurrency-to-cash conversions. Furthermore, the highly volatile nature of cryptocurrency could have a negative impact on the financial stability of the companies involved in such transactions.
In light of these concerns, financial authorities and the Ministry of Education intend to advise universities against accepting cryptocurrency donations in the future. However, depending on the specific conditions, they consider the conversion of previously received donations into cash as an exception. This path could help universities manage cryptocurrency donations which have already been received.
This development follows a review of the donation law earlier this month. The revision expands the types of goods available to citizens to donate to charities. However, despite the growing popularity of digital assets in the country, cryptocurrencies such as Bitcoin remain excluded from the market donation scope.
To know more: Top 5 Web3 Use Cases: Where Web3 Is and Where It’s Going
KOFIU Cryptocurrency Survey Result. Source: KOFIU
According to a recent KOFIU report, South Korea’s crypto user base they 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, up 24 percent from the first half of the year.
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