Korea Blockchain Association Slammed for Poor Screening of Crypto Exchanges
The Korea Blockchain Association (KBA), an industry body tasked with implementing self-regulatory measures for the Korean crypto market, has been criticized for inadequately vetting domestic cryptocurrency exchanges. Accusations include declaring crypto exchanges “safe and secure” even after some of them were hacked while undergoing the inspections. While the South Korean government is once again warming to the blockchain industry with a regulated approach, such instances could throw cold water on their plans.
Subscribe to the Bitsonline YouTube channel for great videos featuring industry insiders & experts
A Rigorous Enough Inspection in Korea?
The KBA conducted a two-month long inspection process to check if 14 local exchanges — which voluntarily agreed to be inspected — met set-out “self-regulatory standards”. These include employing cold wallets, minimum total assets, complying with anti-money laundering policies, and many others.
The two-month inspection was extended past the original one-month deadline to give exchanges time to prepare. The inspections were also mainly interview-based and didn’t include hacking simulations, leading some to accuse them of not being rigorous enough.
Following the inspection, KBA revealed that 12 out of 14 crypto exchanges are up to the mark, while two withdrew from the process. The 12 exchanges included Bithumb, Upbit, Huobi Korea, Dexko, Gopax, Hanbitco, Coinzest, OKCoin Korea, Neoframe, Cpdax, Korbit, and Coinone. Surprisingly, Korea’s largest crypto exchange by trading volume Bithumb also passed the inspection even after recently losing over $30 million USD to a hack.
Coinrail, which suffered an even-larger $66.2 million hack in June 2018, wasn’t included in the process.
As a result, the KBA was criticized for “poor screening of cryptocurrency exchanges”, The Korea Herald reported. To boot, the self-regulatory body did not disclose a comprehensive report of the inspection.
Loopholes in the Self-Regulatory Checks
The KBA acknowledged that the checks were not foolproof, and traders should not completely rely on self-regulatory affirmation.
In a press conference, KBA Chairman Jeon Ha-jin said: “This inspection does not guarantee the absolute safety of the 12 exchanges. The result indicates the 12 exchanges satisfy the minimum requirement for their operations.”
Giving an example, Ha-jin compared self-regulatory affirmation to driving licenses, stating that many have licenses but not all are equally competent drivers.
Kim Yong-Dae, professor at the Korea Advanced Institute of Science and Technology said:
“There are variations in the level of security between domestic exchanges. Some crypto exchanges are doing okay. But I believe other exchanges should invest more in their security systems.”
The KBA’s role in the Korean crypto market is crucial as it acts as the bridge between crypto exchanges and government. Recently, a report surfaced indicating South Korea’s pro-crypto approach.
Per the report, the government is planning to categorize and accordingly regulate the crypto space. Seemingly, the Korean government is looking to embrace crypto but weak actions on the industry’s part could discourage government efforts and temper crypto enthusiasm among the wider public.
The KBA’s purpose is largely to mediate between government and crypto businesses, to develop a positive crypto culture in the country.
Will the KBA’s results have any impact on the crypto market? Share your views in the comments section.
Images via Pixabay