The government of South Korea and local financial authorities are planning to pass the country, first crypto and blockchain legislation as early as possible, to legitimize and strictly oversee the local cryptocurrency industry.
The newly drafted regulatory framework which covers a wide range of businesses and ventures from blockchain projects to crypto exchanges, is expected to fuel the development and deployment of decentralized applications (dApps), and facilitate the rapid growth of cryptocurrency exchanges in the local market.
Crypto Exchanges are Not Prepared in Terms of Security
Hong Seong-ki, the head of virtual currency response team at the country’s main financial agency Financial Services Commission (FSC), said this is an interview with Bloomberg that cryptocurrency exchanges in South Korea are not ready to store and manage billions of dollars in crypto assets such as bitcoin and ether, due to their substandard security measures.
In June alone, two major South Korean crypto exchanges Bithumb and Coinrail were hacked, each losing more than $ 40 million in user funds. Fortunately, both trading platforms have enough capital to cover the amount stolen by hackers whose identities still remain unknown. But, the two security breaches were sufficient to convince local financial regulators that a regulatory framework to protect investors is desperate need to protect investors.
"While crypto markets have rapid growth, such trading platforms do not seem to be well-enough prepared in terms of security. We 're trying to legislate the most urgent and important things first, aiming for money laundering prevention and investor protection. The bill should be passed as soon as possible, "said Hong.
The past throughout two years, the government of South Korea has contemplated the potential outcome of regulating business and the blockchain sector cryptocurrency, and refused to pass the proper policy to regulate the cryptocurrency market because it feared that investors in South Korea would consider it act of endorsement and acknowledgment of cryptocurrencies.
Hong emphasizes in this interview the bill itself is not targeted at growing crypto exchanges and digital assets trading in general, but protecting investors implementing robust internal management systems to prevent large-scale hacking attacks.