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Korean Watchdog Orders 12 Cryptocurrency Exchanges to Revise Customer Contracts

Last Updated March 4, 2021 5:06 PM
Samburaj Das
Last Updated March 4, 2021 5:06 PM

South Korea’s corporate watchdog has today reportedly ordered a dozen domestic cryptocurrency exchanges to revise their adhesion contracts to provide better protection to consumers.

According to Yonhap  news, South Korea’s Fair Trade Commission (FTC) has demanded 12 cryptocurrency exchanges to fundamentally tear up their existing adhesion contracts that customers are mandated to sign while registering with the exchange operators. Adhesion contracts are commonly known as ‘boilerplate’ contracts where the weaker party has little choice in ‘take it or leave it’ agreement drafted by the business.

Commonly used in matters involving leases, insurance, mortgages and more adhesion contracts, Korea’s FTC says, fails to provide adequate protection to customers enrolled in cryptocurrency exchanges. The FTC, which also serves as the economic competition regulator, said current customer contracts from exchange operators ‘unfairly’ keeps users from withdrawing their deposits. The regulator went so far as to claim that current practices among crypto exchanges force users to shoulder any and all financial losses when ending their membership with exchanges.

The FTC’s measures follow notable remarks from the authority’s chairman Kim Sang-Joo who called for a nuanced regulatory approach toward the domestic cryptocurrency space in mid-January 2018. Speculation of a possible ban on all cryptocurrency trading was rife at the time after Korea’s justice ministry confirmed it was preparing legislation to that end along with a complete shutdown of domestic cryptocurrency exchanges. The intended measure triggered a fierce public backlash that eventually led to Korea’s president releasing a statement to cool fears of a ban.

“[Shutting down cryptocurrency exchanges] is not realistically possible,” FTC chairman Kim said at the time. “Based on electronic commerce law, the government does not have the authority to close down cryptocurrency trading platforms.”

Korean authorities subsequently moved to curb anonymous trading of cryptocurrencies among domestic exchanges on January 30.

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