Korea to Hasten Crypto Regulation After Bithumb Hack

As reported, recent Bithumb hack will fasten the process of implementing the country’s first crypto regulatory framework
20 June 2018   978

South Korean authorities have previously announced that they will regulate the exchange of cryptocurrency on a par with banks and tighten the requirements for them. Today's hack of the Bithumb exchange will speed up the process of developing the first fully-fledged legal framework for cryptocurrencies regulating in the country, CCN reports.

On June 11, after several months of discussions, the South Korean government and local financial regulators, including the Financial Intelligence Service, came to the conclusion that it was necessary to properly regulate the crypto-currency market with an eye to protecting investors and preventing large-scale hacker attacks.

Under current regulations, there are clear limitations in preventing money laundering on crypto exchanges because the only way authorities can spot suspicious transactions is through banks. If the bill of lawmaker Jae Yoon-kyung from the Democratic Party of Korea passes, local authorities will be able to impose identical regulations on crypto exchanges that are implemented on commercial banks.
 

Spokesperson from the Korea Financial Intelligence Unit 

 Despite the absurdity of the situation, at present, the crypto exchanges in South Korea is regulated as providers of communication services. In other words, to start the exchange it's enough to have about $ 30. Since exchanges of digital currencies have this status, government agencies and financial regulators do not directly supervise their activities.

On June 18, for the first time in history, local authorities acknowledged that the South Korean government was slow to implement rules to regulate the scope of the cryptocurrency, because it feared that investors would perceive this as a permissive signal for investing in digital assets and a sign of their legitimacy.

An increasing number of officials begin to share the view of a member of the National Assembly Committee Park Yong-kin, who said in late 2017 that the government cannot simply leave cryptocurrency exchanges unregulated because it only worsens the cryptocurrency sector.

We are frustrated as well. We fully understand that the government is reluctant towards regulating the cryptocurrency market because it will inevitably lead investors to consider it as the government’s way of legitimizing the market. But, if the government leaves the cryptocurrency market unregulated, it is simply leaving it vulnerable to variou issues.
 

Park Yong-kin

Member, National Assembly Committee

Local analysts say that officials already planned to speed up the development of measures for control in the cryptocurrency sector after hacking of CoinRail exchange, and the attack on Bithumb, which neither investors nor authorities were ready, will force lawmakers and regulators to present legal acts that will put the crypto exchange on one step with the banks, in even shorter terms.

Once the law is passed, the exchange need to work with local financial authorities and comply with safety standards if they want to continue to operate in South Korea. It is expected that the intervention of the Financial Intelligence Service and the Financial Services Commission will lead to significant improvements in the data processing, security and infrastructure of such sites.

Bithumb to be Charged With Users' Data Leak in 2017

According to the Prosecutor's Office of South Seoul, this situation has lead to second hack of Bithumb in 2017, when $7M were stolen
21 June 2019   740

The Prosecutor's Office of South Seoul has charged one of the largest Bitcoin exchanges in South Korea, Bithumb, with a leak of confidential financial data of over 31 thousand users, as a result of which in July 2017 considerable funds were stolen from the platform. This is reported by Cryptonews with reference to ZDNet Korea.

In addition to Bithumb, in the framework of the same case, accusations of violating the law on managing information networks and the law on information protection were brought against the travel agency Hana Tour and With Innovation, the operator of the hotel booking application Yeogi Eottae.

The prosecutor's office believes that Bithumb did not take adequate measures to ensure security. In particular, all data about users received hackers was stored on one computer, and the employee of the exchange who worked on this device did not even use anti-virus programs.

The prosecutor's office also believes that this leak led to second hack of Bithumb in 2017, which resulted in nearly $ 7 million being stolen. Representatives of the exchange have denied the connection between these incidents, however.