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South Korea’s Govt release findings from security audit on cryptocurrency exchanges

Photo Credit: Forbes.com

South Korean regulators recently released the results of their inspection of domestic cryptocurrency exchanges. The inspections highlighted that some previously inspected exchanges were still vulnerable to hacking attacks due to poor security.

The audit was carried out by the Ministries of Science and Finance, in collaboration with the Korea Internet and Security Agency (KISA). It was conducted from September to December 2018. This investigation was a follow up to previous reviews in 2017.

Audit examines different aspects of security

The exchanges were inspected in an audit that looked different aspects of administrative, network, system and operational security, as well as database backup and wallet management.

The government agencies responsible for the checks also investigated whether the identified issues in previous investigations had been corrected. In addition to this, 21 new platforms came under scrutiny under the same guidelines.

In addition to the exchanges that didn’t improve their security measures, some crypto exchanges lacked adequate system infrastructure such as dedicated security and management staff, a password management system, crypto deposit and withdrawal controls, and a system to monitor their crypto wallets.

Seven of the crypto currency exchanges passed the investigation – Upbit, Bithumb, Gopax, Korbit, Coinone, Hanbitco, and Huobi Korea

The remaining exchanges were found to be vulnerable to hacking attacks because of poor security. The Ministry of Economy and Finance did not name the platforms that did not get approval, but the agencies put down the security failures to insufficient establishment and management of security system such as basic PC and network security.

South Korea has lost many millions of dollars in cryptocurrencies through hacks at exchanges such as Coinrail (over $40 million) and Bithumb (over $30 million).

Last summer due to the many serious security hacks, South Korea’s Financial Services Commission, called on government to pass a bill regulating domestic cryptocurrency exchanges in order to regulate and improve security in the industry.

Crypto currency regulation trending in Government across Asia

Investigating and putting regulatory frameworks in place for digital trading is a huge trend in Government in Asia now. This week also saw Malaysia announce that all digital trading platforms and Initial Coin Offerings must have approval from Malaysia’s Securities Commission in order to operate. They are also developing a set of regulatory guidelines which will be released before end of the first quarter 2019.

The Thai Securities and Exchange Commission (SEC) announced last week the results of the applications for crypto business licenses. Seven companies applied for a license and have been allowed to operate their crypto businesses while the regulators reviewed their applications.

The country’s ministry of finance has granted digital asset business licences to four applicants, two applications have been rejected and one is still under review.

Three crypto exchanges and one broker-dealer have received approval. The three approved exchanges are Bitcoin Exchange Co. Ltd. (Bx), Bitkub Online Co. Ltd. (Bitkub), and Satang Corporation (Satang Pro). The approved broker-dealer is Coins Th Co. Ltd.

Thailand has also led the way in recognising the need for regulation in this industry in Asia. The SEC introduced a regulatory framework last year which defined rules for investing in digital assets offered in an initial coin offering (ICO).

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