Bitcoin exchanges in South Korea are under regulatory radar after Korean exchange Youbit was hacked earlier this month and its funds stolen.
Reports in the local media reveal that regulatory authorities in South Korea have started onsite inspection of bitcoin exchanges in the country. According to a notice by Office for Government Policy Coordination onsite inspection were carried out of more than a dozen bitcoin exchanges to determine whether they were in compliance with regulations governing cryptocurrency trading.
Reports also indicate that the regulators weren’t impressed with what they found and in an update on their site they noted that the administrative and technical security of these exchanges were inadequate.
The inspections were carried out because of the security breach at Youbit, a small exchange based in Seoul, in which millions of dollars worth of cryptocurrency were stolen. It was the second time Youbit had been breached in 2017 alone, and it prompted Yaipan, the exchange’s parent company, to immediately halt trading on the exchange and file for bankruptcy.
Although Youbit was a small exchange — and the hack resulted in the theft of just 17 percent of the company’s assets — the incident became quite controversial after South Korean authorities alleged the hack was perpetrated by hackers acting on behalf of the North Korean regime.
In addition to stepping up enforcement of domestic bitcoin exchanges, the South Korean government is also implementing new regulations aimed at curtailing the cryptocurrency boom.
According to a leaked draft, the regulations will restrict unaccredited investors from speculating on cryptocurrencies using Korean trading platforms and could require exchanges to seek government approval to list new cryptocurrencies.
Until now, the government had been hesitant to impose regulations on bitcoin, fearing that to do so would lend legitimacy to the nascent asset. However, Korea has emerged as a central hub for cryptocurrency trading in Asia, particularly since China outlawed domestic bitcoin exchanges from operating on the mainland, and regulators recognized that the markets had grown so large that the government could no longer afford to ignore them indefinitely.