South Korea to Inspect Cryptocurrency Exchanges, Amid YouBit’s Bankruptcy

On-site inspections follow major theft from and subsequent bankruptcy of cryptocurrency exchange YouBit.

The South Korean financial regulator has begun on-site inspections of cryptocurrency exchanges, the day after an exchange filed for bankruptcy after suffering an attack, according to Yonhap news.

YouBit was hacked yesterday, and thieves made off with 17% of its cryptocurrency holdings. It was the second attack on the exchange this year, and it has decided to file for bankruptcy. It apologised to its customers and made assurances regarding lost funds.

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The government said in a statement today: “The bankruptcy of a virtual currency exchange (YouBit) is expected to lead to financial losses for users. Users should exercise extraordinary precautions and wariness about the risks involved in virtual currency speculation and reckless participation in virtual currency transactions.”

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The Fair Trade Commission will be looking at 13 major exchanges, including Bithumb, Coinone and Korbit. It has already warned some exchanges that they need specific licences that deal with information security – the license is called the Information Security Management System (ISMS) certification, and it is mandatory for companies with sales of minimum 10 billion won and/or 1 million visitors day.

The government claims that most cryptocurrency exchanges have insufficient security measures, according to the report. It reminded the public in a warning today that cryptocurrency is not a “legal tender whose value is guaranteed by the central bank”.

The authorities’ distrust of cryptocurrency has not dampened public enthusiasm for it at all – Bithumb, the country’s largest exchange, currently boasts a daily volume of over $600 billion in Bitcoin trading alone.

Last week, the government finally decided to allow Bitcoin exchanges to legally operate. The decision was not a given as the authorities have been very sceptical of Bitcoin, not least because North Korea is thought to be employing an army of hackers to disrupt such systems.

In keeping with the attitude of Seoul towards cryptocurrency, strict conditions were imposed on exchanges, and the punishments for illegal activity were raised too.

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