Some South Korean virtual asset (cryptocurrency) businesses have donated self-issued coins to universities, but the universities are unable to convert these donated coins into cash. This is because financial authorities are not allowing universities to open corporate accounts for coin transactions.
Currently, to sell coins and convert them to Korean won, a real-name account at a virtual asset exchange is required. However, under the guidance of financial authorities, banks are not issuing virtual asset exchange accounts to domestic corporations and institutions. This is due to concerns that corporate accounts, which are opened under a corporate name, cannot be verified as real-name accounts and pose a high risk of money laundering.
According to financial authority officials on May. 26, the Korean Financial Intelligence Unit (KoFIU) under the Financial Services Commission (FSC) and the Ministry of Education will likely maintain their stance of not allowing universities to open corporate accounts for coin transactions. This decision follows a request made earlier this year by some universities that had received large coin donations to allow the opening of corporate accounts for cash conversion.
Currently, there are no specific provisions under the Act on Reporting and Using Specified Financial Transaction Information that prohibit corporates from opening their accounts. However, financial authorities only permit corporate accounts for certain government agencies, such as the prosecution and the National Tax Service, and only for public interest purposes.
A senior official from the financial authorities stated, “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.”
The reason financial authorities are concerned about this matter is that allowing corporates to open accounts can lead to many side effects, especially related to money laundering.
Due to the ease of establishing and dissolving corporations in Korea, there is a risk that shell corporations could emerge to launder proceeds from criminal activities by converting coins into cash. Additionally, given the high volatility of coins, allowing corporate coin transactions could negatively impact the financial soundness of businesses.
For example, Seoul National University received a coin donation worth 1 billion won ($732,804) from the game company Wemade in 2022. Similarly, Korea University, Sogang University, Dongseo University, and others also received coin donations worth 1 billion won from the same company around the same time.
In response to these concerns, financial authorities and the Ministry of Education plan to advise domestic universities against accepting coin donations in the future. However, they are also considering an exception to allow cash conversion for donations that have already been received, depending on the amount and other conditions. This indicates a potential pathway for universities to manage previously received coin donations.
