South Korea, as a nation, has been progressive in accepting new innovation and technology and it has done same with blockchain and cryptocurrencies. Understanding this acceptance ethos of the country and its citizens, Seoul Central District Court has ruled in favor of a local crypto exchange and lashed the bank for breaking ties with the exchange
Its Coinis exchange vs Nonghyup Bank
According to the tweet put forward by Joseph Young, 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 South Korea.
Seoul Central District Court told Nonghyup, a major bank in South Korea, that banks cannot unfairly end banking partnerships with crypto exchanges.
Nonghyup tried to end its services to a local crypto exchange. The court sided with the exchange.https://t.co/agX0ZGMFwZ
— Joseph Young (@iamjosephyoung) October 30, 2018
According to the report, 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 to this action by the bank, 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.
Listening to the arguments from both ends, the 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). He was quoted saying
“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 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 has established an example 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.
Nonghyup seems a serial offender here as previously, it had also declined a partnership with Bithumb, the second largest cryptocurrency exchange in South Korea. 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. A Bithumb representative was quoted saying
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.
The court has left the precedent not just banks and courts in South Korea but across the world. It is necessary for other courts to understand and enforce that wrong enforcements of banks will no more be heard.
Will other courts pronounce similar decisions as the Seoul District court? Do let us know your views on the same?
I am an entrepreneur and a writer with a bachelors degree in Computer Science. I manage the blockchain technology and crypto coverages at Coingape. follow me on Twitter at @arya_achal or reach out to me at achal[at]coingape.com.