Eight major cryptocurrency exchanges in the South Korean market including Korbit, Coinone, Upbit, Coinplug, RippleForYou, and Coinpia have been fined in the range of $10,000 to $25,000 for having poor security measures.
Fined For Poor Security
With the exception of Bithumb, the largest cryptocurrency exchange in South Korea, which is also the second biggest trading platform in the global cryptocurrency market, the majority of cryptocurrency exchanges in the country have been fined by South Korea Communications Commission (KCSC).
The eight cryptocurrency exchanges that were fined for a total amount of $130,000 are said to be in violation of the Information and Communication Network Act and Privacy Act.
According to Yonhap News, a South Korean mainstream media outlet, KCSC alongside the Ministry of Science, Technology, and Information, and the South Internet Development Agency launched a full investigation into local cryptocurrency exchanges from October 10 to December 28 in 2017.
Out of the 10 cryptocurrency exchanges that were investigated by the five ministries, eight were found to be in violation of the Information and Communication Network Act, and to have implemented poor security measures.
The official statement of the South Korea Communications Commission translated at CCN read:
“While daily trading volumes and the number of users of cryptocurrency exchanges are increasing exponentially, local trading platforms have implemented extremely poor security measures. Basic measures including access control device installation and operation, storage of user passwords, and protection of users were integrated poorly.”
Coinone and Yapian received a combined penalty of over $50,000 for failing to store account passwords and sensitive user information securely. The KCSC emphasized that the two cryptocurrency exchanges did not segregate user accounts that were inactive for more than a year.
Korbit, the third largest exchange in the South Korean market, was fined $20,000 for lacking security breach detection tools and a server intrusion prevention system. Upbit, the most popular cryptocurrency-to-cryptocurrency exchange in South Korea that is operated by Dunamu, a subsidiary of KakaoTalk operator Kakao, was fined $20,000 for being in violation of Privacy Act.
Low Penalties, Optimistic
A KCSC spokesperson told Yonhap stated that the penalties received by local cryptocurrency exchanges are “far too small,” and the KCSC is aware of it. But, given that the exchanges were found in violation of Privacy Act and other policies for the first time since their launch, the agency imposed a smaller fine.
The imposition of fines against cryptocurrency exchanges for poor security measures is optimistic for the South Korean cryptocurrency market in the long run, because it has shown that the government has taken the approach of regulating the market and protecting investors, rather than issuing an outright ban on cryptocurrency trading.
The KCSC provided the eight exchanges a 30-day deadline to implement necessary security measures and systems to prevent the theft of user information, account data, and funds. Lee Hyo-sung, the chairman of KCSC, said in a press conference that the agency will ensure South Korean cryptocurrency exchanges will operate with better security measures to protect investors and traders.