South Korea has stated that the country will conduct an on-site inspection of its bitcoin exchanges to ensure that they take proper cybersecurity measures to protect customer assets.
South Korea can be added the group of countries that have recently taken action to improve security features of cryptocurrency services in their country. The country has stated that it will start conducting on-site inspections of bitcoin exchanges and cryptocurrency service providers to ensure that they take adequate security measures.
It seems that governments all over the world have a tacit understanding of improving the security related to cryptocurrencies. First, China outright banned bitcoin exchanges and bitcoin trading within the country. Then, Japan formed a team of FSA individuals to put bitcoin exchanges and transactions under surveillance. Now, South Korea has taken action against bitcoin exchanges and cryptocurrency service providers.
The Ministry of Science and Information Communications Technology, along with the Korea Communications Commission (KCC), made an announcement stating they will ensure that these services comply with the privacy laws of the country and properly protect customer assets.
The announcement comes at a time when South Korea’s involvement in bitcoin trading is growing more than ever. With China backing out of bitcoin trading, a huge volume of trading has moved to South Korea and Japan. For the past few months, South Korea has been mulling over regulating bitcoin trading in the country.
There have been instances of cryptocurrency breaches involving hacking of customer wallets and revealing of their personal information. Bithumb was hacked in a similar fashion in July, where information of 30,000 customers was leaked. In addition to that, a group called Temp.Hermit has been orchestrating cyber-attacks against Korean bitcoin exchanges since May, according to FireEye, a US cybersecurity firm.
Korea authorities recognize the danger related to cryptocurrencies and have thus made this announcement:
The KCC will provide security consulting to any service that provides digital currencies. The KCC will also study their existing systems and advise as to how they can improve their security systems to protect themselves against cyber attacks.
As for regulating Bitcoin trading, a task force was set up in July to see if there was a need for regulations regarding Bitcoin trading. The task force concluded there was indeed a need, and a proposal was sent to the Electronic Financial Transactions Act to implement regulations in order to protect customers. This is followed by making the banks become proactive in protecting customers from these kinds of attacks, as cryptocurrency exchanges are putting greater stress on user identification.
In August, the lawmaker Park Yong-jin, submitted a proposed alteration to the Electronic Financial Transactions Act to offer a regulatory agenda for bitcoin and other digital currencies. Earlier this month, South Korea’s top financial officials jointly declared their strategies to deal with digital currencies. One strategy would demanding banks to perform due diligence in all bitcoin exchanges to increase consumer verification. In the meantime, small-sum bitcoin payments were legalized back in July as part of the revised Foreign Exchange Transaction law.
Cryptocurrency services and bitcoin exchanges do have many security vulnerabilities, which is why hackers are able to breach them and steal money from customer wallets. While governments and regulators understand that cryptocurrencies provide privacy to customers, they also understand that it is important to protect their citizens from cybercrime. Therefore, all countries with a high volume of bitcoin trading are now coming up with methods to improve the security of their exchanges.