Over two months ago, the Korea Blockchain Association (KBA) decided to initiate self-inspections into cryptocurrency industry striving to insure the digital exchanges operating in South Korea had safeguards to check themselves from potential issues such as cyber-attacks and malicious activities.
The spark led to a rollout of self-inspections of the cryptocurrency exchanges by the KBA stemmed from the announcements, which the Korean Financial Services Commission (FSC) gave to the public about newly introduced crypto regulatory frameworks.
As previously reported by Coinspeaker, last week South Korea officially recognized the cryptocurrency exchanges as the legal entities meaning from now on the country’s digital traders have to comply with exacting Know-Your-Customer and Anti-Money Laundering rules, as well as customer verification policies.
Up to a point, the FSC has stated it is going to have a strict approach towards trading regulations and user monitoring. The FSC specifically wanted money laundering and cyber-crime prevention to be the major issues that the exchanges should be focusing on. Hence, the forthcoming FSC regulations aimed to provide frameworks that pertains to AML and KYC requirements for the exchanges to follow.
The other day, the Korea Blockchain Association, an industry body that contains nearly two dozen cryptocurrency companies, has concluded an in-house examination of 12 domestic digital currency trades that began in May.
The results of the inspection done by third party experts that were approved by the KBA back in June see 12 out of the 14 exchanges gain an approval for meeting the “general standards” mandated by the KBA. The criteria include the adoption of cold or offline wallets, adherence to anti-money laundering norms, possessing a certain minimum in assets and more. Out of 14 exchanges at first willing to undergo the examination, Sunny7 and Komid have been withdrawn during the past months.
Reportedly, the twelve crypto exchanges had tough self-imposed tests to pass. Although there was news of security flaws found in some of the dozen approved exchanges, the KBA is keeping tight-lipped on the details so they cannot be used against the Korean crypto exchanges by cyber-hackers. Moreover, there was no explanation of how well the exchanges met the security standards stated by the KBA.
During a press conference held in Seoul on Wednesday, the head of the KBA’s inspection committee, Jhun Ha-Jin, stressed that provided approval does not assure exchanges’ immunity, saying:
“This inspection does not guarantee the absolute safety of the 12 exchanges. 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.”
The ambiguous nature of the statement from the KBA has fielded criticism of the Korean industry, since an approval of self-regulatory body gives assurances to the investors of cryptocurrency and blockchain developers who might end up cutting loose due to regulatory negligence.
The KBA has likewise handled feedback for multiplying its underlying one-month review period in May to allow time for trades that did not meet the base criteria to plan for the assessment.
The 12 exchanges receiving the approval are: Dexko, Hanbitco, OKCoin Korea, Huobi Korea, Bithumb, Upbit, Neoframe, Gopax, Cpdax, Coinzest, Korbit and Coinone. Notably one of those picking up the endorsement was Bithumb, the country’s largest exchange by trading volume, disclosed a $30 million hack of cryptocurrencies less than a month ago.