South Korean authorities have begun conducting onsite inspections of domestic bitcoin exchanges following the hack of Korean exchange Youbit earlier this month.
According to an official notice published by the Office for Government Policy Coordination, regulators conducted onsite inspections of more than a dozen bitcoin exchanges to determine whether they were in compliance with regulations governing cryptocurrency trading.
The inspectors were not pleased by what they found, according to an update published following the onsite visits.
“As a result of conducting on-site inspections on the major virtual currency exchanges, most of the surveyed companies (10 companies) conducted administrative and technical security such as installation and operation of access control devices and encryption measures of personal information Overall, the measures were found to be inadequate,” the notice read, according to a rough translation.
The inspections were prompted by the Dec. 19 hack of Youbit, a small exchange based in Seoul. It was the second time Youbit had been breached in 2017 alone, and it prompted Yaipan, the exchange’s parent company, to immediately halt trading on the exchange and file for bankruptcy.
Although Youbit was a small exchange — and the hack resulted in the theft of just 17 percent of the company’s assets — the incident became quite controversial after South Korean authorities alleged the hack was perpetrated by hackers acting on behalf of the North Korean regime.
In addition to stepping up enforcement of domestic bitcoin exchanges, the South Korean government is also implementing new regulations aimed at curtailing the cryptocurrency boom.
According to a leaked draft, the regulations will restrict unaccredited investors from speculating on cryptocurrencies using Korean trading platforms and could require exchanges to seek government approval to list new cryptocurrencies.
Until now, the government had been hesitant to impose regulations on bitcoin, fearing that to do so would lend legitimacy to the nascent asset. However, Korea has emerged as a central hub for cryptocurrency trading in Asia, particularly since China outlawed domestic bitcoin exchanges from operating on the mainland, and regulators recognized that the markets had grown so large that the government could no longer afford to ignore them indefinitely.
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Last modified: May 21, 2020 11:22 AM UTC