South Korean regulators on Thursday released the outcome of their collective inspection of 38 domestic cryptocurrency exchanges. The inspections identified 14 previously-inspected exchanges as “vulnerable to hacking attacks at all times because of poor security.”
The recent probe by the Ministries of Science and Finance, in collaboration with the Korea Internet and Security Agency (KISA), was conducted from September to December 2018 as a follow up to previous reviews in 2017.
In this latest inspection, the government agencies responsible for the checks investigated whether the identified issues in previous probes have been corrected. Also, 21 new platforms came under scrutiny under the same guidelines.
In addition to those exchanges that didn’t improve their security measures, 17 crypto exchanges lacked adequate arrangements such as dedicated security and management staff, a password management system, crypto deposit and withdrawal controls, and a system to monitor their crypto wallets.
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The agencies also revealed that seven crypto venues, which were previously audited in September, had dealt with the required adjustments to their systems and received a full certification on 85 security items. These were: Upbit, Bithumb, Gopax, Korbit, Coinone, Hanbitco, and Huobi Korea, a government statement revealed.
Different Regulatory Approach
Cryptocurrency exchanges in South Korea are presently classified as information providers rather than financial institutions. Thus, they fall under the jurisdiction of the Korean Ministry of Science rather than Korea’s financial regulators.
But after the government has been criticized for not doing enough to prevent hacking damages, the Financial Supervisory Service (FSS) said in October it would widen its probe on accounting practices to include the nation’s big cryptocurrency exchanges. This announcement follows the prosecutors launching an investigation about the use of corporate accounts by crypto venues which the regulators say can lead to money laundering.
South Korea’s exchanges hold about $1.9 billion worth of cryptocurrencies in their accounts, as per the latest report by the central bank of the country, which easily lists some of them among the big firms targeted by the latest FSS probe.
Earlier in May, Upbit was raided by government’s investigators and local police for alleged fraud. However, the exchange managed to pass independent audits, showing full solvency as Upbit’s reserves ratio stands at 103 percent and cash ratio stands at 127 percent.