New Korean Laws Require Crypto Exchanges to Accept Responsibility for Client Losses
At least five major crypto exchanges in Korea have been forced to adopt new measures to comply with new requirements that require them to be liable for any losses irrespective of whether they happen as per the exchange’s negligence or not.
The Yonhap News Agency reports that five exchanges based in Korea including Bithump have been forced to revise their terms and conditions to comply with the fresh directive from the nation’s Fair Trade Commission.
The new directive states that all exchange platforms will be held liable for any issues emanating from hacks or system downtime whether such issues happen due to the negligence of the exchange or not.
The previous Terms of Service (ToS) by Bithumb indemnified the exchange from any losses that occur beyond the firm’s control. The new requirement comes amid increased cyber attacks happening on crypto exchanges in the country, leading to huge losses. The new requirements are meant to protect the public from any losses of their crypto assets.
Bitcoinist reports that there are several reports showing that North Korea could be bankrolling cybercrime syndicates to hack the crypto exchanges in South Korea. Security experts have reasons to believe that North Korea is using the funds from these hacks to its nuclear weapons programs.
In particular, Bithumb has suffered various hacks where the exchange lost more than $45 million worth of crypto in two distinct attacks from June 2018 and March 2019.
When the March 2019 hack occurred, there were credible reports indicating that the attack was an inside job heist. CipherTrace report on crypto anti-money laundering revealed that internally-orchestrated crypto heists was an emerging risk in the crypto industry.
The move by South Korea follows after Japanese Financial Services Agency (FSA) ordered all the crypto exchanges to enhance their cold wallet security protocols. The agency stated that the directive was meant to prevent rogue actors within the exchanges from stealing stored funds. U
Slow Growth In The Sector
Majority of South Korean exchanges are hoping that the new directive will enhance user confidence and improve financial performance this year. In 2018, three of the largest crypto exchanges in the country reported losses as only Upbit registered a profit.
Bithumb led the pack by reporting a loss of over $180 million. Both Korbit and Coinone reported a loss of $40 million and $5 million respectively.
The bearish market in 2018, as well as increased rates of cyber attacks, have been blamed for the stunted growth in the industry. With the market showing strong bullish signs this year, and enhanced measures to curb attacks, the exchanges are hopeful of registering healthier revenue returns.
User confidence is also likely to increase as exchanges will have to pay their clients for any loss caused. Previously, exchanges would only reimburse their users if there was a strong evidence indicating that their systems were the cause of the loss.
Do you think other countries should force exchanges to reimburse their users in case of a loss? Share your views with us in the comments section.