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Korean Crypto Exchanges Revise Terms of Service in Boost for Investors

Last Updated March 4, 2021 2:36 PM
Joseph Young
Last Updated March 4, 2021 2:36 PM

By CCN.com: According to The Korea Herald, Bithumb and four other major crypto exchanges in South Korea have formally changed their terms of service to become liable for potential hacking attacks that may affect users.

Mobile interface of Bithumb, South Korea’s largest crypto exchange alongside UPbit. | Source: Shutterstock

The report read:

“Five cryptocurrency exchanges have changed their terms of service in a way that they can be liable for problems caused by potential cyberattacks or system malfunctions, even if operators are not willfully or grossly negligent, South Korea’s antitrust regulator said Monday.”

The change in terms of service by exchanges follows the encouragement of the Korea Blockchain Association toward exchanges to establish a better system to address security breaches.

Crypto Investors Will Likely Feel Safer

Previously, the terms of service of major crypto exchanges in South Korea explicitly stated that if the exchange is not found to have demonstrated willful or gross negligence, it is not liable for the losses suffered by investors.

Upon the request of the Fair Trade Commission (FTC) in April 2018, exchanges are said to have officially made changes to their terms of service to better protect investors and to establish a safer ecosystem for crypto traders.

The change also comes after the recent security breach suffered by Bithumb in March, a case in which the dominant crypto exchange lost over $13 million.

At the time, the exchange said that it suspects the incident to involve insiders and that the exchange was at fault for primarily focusing on the threat of external attacks rather than internal.

Bithumb said :

“According to the company’s manual, Bithumb secured all the cryptocurrency from the detection time with a cold wallet and checked them by blocking deposit and withdrawal service. As a result of the internal inspection, it is judged that the incident is an ‘accident involving insiders’. Based on the facts, we are conducting intensive investigations with KISA, Cyber Police Agency and security companies. At the same time, we are working with major exchanges and foundations and expect to recover the loss of the cryptocurrency equivalent.”

While large-scale crypto exchanges are typically able to cover breaches to the tune of tens of millions of dollars with corporate funds, as exchanges prefer to keep a reserve of crypto assets that is equivalent to the amount stored in a hot wallet, a guarantee that investors are protected from potential hacking attacks would create a safer environment for investors.

Better Road Ahead

As said by Jeon Ha-jin, the chairman of South Korea Blockchain Association, in July 2018, various crypto-related organizations and companies are working to establish a system to respond to hacking attacks. Jeon said :

“Stealing cryptocurrencies is similar to stealing cash, and exchanges will continue to be targeted by hacking attacks in the long-term. It is as important to establish systems to deal with the aftermath of hacking attacks as integrating various methods to prevent hacking attacks.”

With insurance, a practical regulatory framework, and guarantee for investors regarding the safety of their funds, the public’s perception of the crypto exchange market, specifically on the security and the reliance of the structure of the market, is expected to improve.