Cryptocurrency & Blockchain Business
Jhoo Dong-chan

South Korean blockchain association under fire for poor screening of cryptocurrency exchanges

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The Korea Blockchain Association (KBA) is under fire for poor screening of the country’s cryptocurrency exchanges. The association is a self-regulating group for local blockchain companies made up of 23 companies, including 14 firms that run some of the largest exchanges in the country such as Bithumb, Coinone and Korbit.

The group conducted an in-house inspection of the nation’s 12 cryptocurrency exchanges’ safety and security. Although the inspection includes domestic exchanges that suffered from recent cyber-attacks, the group announced during a press conference that all 12 passed the group’s self-regulatory standards. 

The KBA even extended its one-month inspection to two months to allow sufficient time for under-prepared exchanges, inviting criticism for carrying out an inspection in name only. 

KBA Chairman Jeon Ha-jin indirectly admitted the group’s inspection may have loopholes.

“This inspection does not guarantee the absolute safety of the 12 exchanges,” he said during a press conference held at the Korea Federation of Banks head office in central Seoul.

“The result indicates the 12 exchanges satisfy the minimum requirement for their operations. It is like a driver’s license. It is hard to tell whether they are good drivers or not.”

Of the 12 exchanges that underwent the group’s inspection, Bithumb came under a cyber-attack last month. The nation’s largest exchange said cyber criminals stole an estimated 35 billion won ($31.5 million) worth of virtual coins from it. 

Also, the KBA did not disclose a detailed score or security rating of each cryptocurrency exchange, casting doubt about the fairness of the inspection. The KBA said the disclosure could trigger another cyber-attack on domestic exchanges with weaker security firewalls.

“There are variations in the level of security between domestic exchanges,” said Korea Advanced Institute of Science and Technology professor Kim Yong-dae.

“Some crypto exchanges are doing okay. But I believe other exchanges should invest more in their security systems.”

The inspection came after the CEO of a local cryptocurrecny exchange was arrested on charges of embezzlement and fraud in April. Kim Ik-hwan, CEO of Coinnest, the nation’s fifth-largest exchange, and some executives were arrested for allegedly funneling money out of investors’ accounts into their own.

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