New rules come after Coinnest CEO caught stealing from traders
Korea Blockchain Association decided to impose self-regulatory measures to oversee the activities of its members after the CEO of a major Korean exchange was found to have funneled money from traders’ accounts into his own.
In a press briefing on Tuesday in Yeouido, western Seoul, the association revealed a new self-regulatory framework and said it has started an auditing process on its member companies.
Korea Blockchain Association is a self-regulating group for local blockchain companies. It is comprised of 23 companies, including 14 firms that run some of the largest exchanges in the country such as Upbit, Bithumb, Coinone and Korbit.
Under the measures, exchanges will be obliged to store trading records of their investors for five years. They are required to set up an identification process in order to prevent money laundering.
Another requirement is that members create an internal detection system that can monitor and alarm operators when any irregular activity is identified.
In addition to the regulations designed to prevent money laundering, the association will have its members submit their financial statements, audit reports and stockholders’ lists.
If an exchange decides to list a new cryptocurrency on its trading platform, it will be required to disclose white papers on the new coin and its trading price in markets outside of Korea.
Exchanges will also have to have their own codes of conduct.
The measures announced on Tuesday came about two weeks after the CEO of a local bitcoin exchange was arrested on charges of embezzlement and fraud. Kim Ik-hwan, CEO of Coinnest, Korea’s fifth-largest exchange, and some of the executives at his company were detained for allegedly funneling money out of investors’ accounts into their own accounts.
“Through self-regulatory measures, we will establish order in the domestic cryptocurrency market,” said Jeon Ha-jin, chairman of the association’s self-regulatory committee, adding that these measures should ensure transparency in cryptocurrency trading in Korea.
Self-regulatory committees will conduct on-site inspections on member companies to assess whether their systems meet the criteria set by the association. The auditing process will be completed at the end of May, the committee estimates.
Although the association revealed the measures on Tuesday, some market watchers are skeptical as to how much of an impact these measures will have on making cryptocurrency trading in Korea more transparent.
“It feels like the association is one step behind in addressing transparency issues in cryptocurrency trading,” said an executive of a local blockchain company who requested anonymity.
Another issue is the level of punishment once a company is found to have violated the regulations.
In case any companies that are member of the association fail to meet the standards established, they will be expelled from the association. This has no legal ramifications, so while they will be stripped of their association membership, they will still be able to operate as trading platforms.