Cryptocurrency Exchanges Investigated By South Korean Fair Trade Commission

News, Regulation | December 27, 2017 By:

The South Korean Fair Trade Commission (FTC) is reportedly investigating 13 major cryptocurrency exchanges in the country for violations of consumer laws in electronic commerce and contracts. The investigations came after the bankruptcy announcement by cryptocurrency exchange Youbit after a major hack.

The FTC said it will look into whether the exchanges should remain under the online retail business category, or fall under a different purview to enforce stronger measures. It will also check whether there is any unfairness among the terms and conditions used by the business operators and take action in accordance with relevant laws and regulations.

The investigation is a follow-up on the government’s wide-ranging measures to curb cryptocurrency speculation and crimes. According to the government, previous inspections on cryptocurrency exchanges revealed that 10 companies demonstrated administrative and technical security procedures, such as the installation and operation of access control devices and encryption measures of personal information. Overall, those measures were found to be inadequate.

Last week, the Ministry of Science and Technology announced that Bithumb, Korbit, Coinone, and Upbit, which are among the 13 being investigated, are required to receive 2018 Information Security Management System (ISMS) certification. That system certifies the appropriateness of information protection systems used by companies with annual revenue of more than 10 billion won and average daily visits of over one million. They have also been urged to strengthen the security of their exchanges.

Small and medium-sized cryptocurrency exchanges that are not required to meet this standard will be subject to the Personal Information Management System, an “autonomous certification system that assesses the comprehensive management system of collecting, using and destroying personal information of companies.” For these exchanges, the Korea Communications Commission (KCC) will be responsible, strengthening the protection of personal information. The Commission will also strictly enforce punitive fines and penalties for exchanges that violate related laws.

The government also warned that cryptocurrency is not a “legal tender whose value is guaranteed by the central bank,” and therefore its prices could fluctuate and result in losses.