Cryptocurrency exchanges’ security systems should be as secure as those of commercial banks since they store more than 4 trillion won worth of virtual coins, analysts said Thursday.
On Wednesday, Korea’s largest cryptocurrency exchange Bithumb was looted by a cyberattack, losing 35 billion won ($31 million) worth of virtual coins.
It came the week after a similar cyberattack where another major exchange Coinrail lost 40 billion won worth of coins, and experts said the government should order domestic cryptocurrency exchanges to establish more tightened security systems.
“Domestic cryptocurrency exchanges feature centralized coin trading systems instead of using blockchain technology as of this month. Investors buy and sell their virtual coins as they deposit and withdraw money in commercial banks,” said Park Sung-jun, director of Dongguk University’s Blockchain Research Center.
“Domestic cryptocurrency exchanges are at a transition period to apply decentralized trading systems featuring blockchain technology. The current systems could be vulnerable to such cyberattacks. Investors’ coins stored in the exchanges could be stolen instantly if their systems are breached, so they should come up with stronger security systems.”
The nation’s cryptocurrency exchanges are currently regulated by the Korea Communications Commission’s Information Network Law instead of the Electronic Financial Transaction Act. The latter is stricter.
“The government still does not consider virtual coins as currencies,” Park said.
“Since they are not currencies, those exchanges are not regulated by the related financial laws. Following a series of cyberattacks, cryptocurrency investors are losing their trust in domestic exchanges. Some even suspect those cryptocurrency exchanges of fabricating the cyberattacks, but the government still stands idly by doing nothing.”
Blockchain industry insiders, however, said tightening regulations on domestic exchanges could discourage the industry’s growth.
“The nation’s virtual coin market was hit hard by a series of government announcements about regulating the cryptocurrency market in late January,” a blockchain industry insider said.
“Cyberattacks won’t take place once domestic exchanges fully adopt decentralized trading systems. I believe the government should approach the case more carefully.”
Korea has become one of the busiest virtual coin-trading countries in the world, and Bithumb is the nation’s largest cryptocurrency exchange in trading volume. It is also the world’s seventh-largest exchange with daily trading volume of 500 billion won worth of virtual coins.