Category Archives: Bithumb

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South Korean Insurance Firm Offers Insurance Against Hacking for Crypto Exchanges

Cryptocurrency exchange operators in South Korea can now be insured against hacks through an insurance firm that offers cyber-insurance to cover cryptocurrency losses.

Crypto-Insured

A typical cyber-insurance product compensates for the loss of personal information. However, a South Korean firm is taking the concept a step further by offering an insurance policy for money lost by cryptocurrency exchanges.

The ‘hack’ cover is from a local insurance firm known as ‘Hanwha Insurance’, and it will provide domestic exchanges with an added layer of protection.

A representative from Hanwha Insurance said: “We plan to start negotiations with individual exchanges for insurance starting next month.” He further added that “It is not a product that has to be compulsory, but it can be outlined if we discuss how much demand there will be. Even if the exchange wants to join, it will require as much coordination as the insurance and reinsurance companies need to meet in order to get insurance.”

A report from Asia Time further notes that some of the most prominent exchanges in South Korea and the world have been insured, including Bithumb for USD $5.3 million, Upbit for USD $4.5 million, Coinone and Korbit for USD $2.7 million.

The cryptocurrency industry is no stranger to theft. The hacking of exchanges and wallets has become an area of concern for governments, industries, and consumers. This has invariably led to several innovations in crypto-storage and security, as well as turning the space into a ‘high-risk’ area.

Reluctance

In 2018 alone, losses due to crypto-theft have surpassed USD $1.73 billion, more than half of the total recorded losses since 2011.

On the 20th of June 2018, Bithumb, the sixth largest exchange in the world and South Korea’s largest exchange, announced that it suffered a costly USD $31 billion hack. At that time the exchange ceased all cryptocurrency and fiat withdrawals, customers were also told not to deposit any cryptocurrencies due to Bithumb moving all its assets into cold storage.

A week later, with the help of other crypto-exchanges Bithumb had managed to recover just over a third (USD $14 million) of its losses. However, deposit and withdrawal services were reopened on August 4th, 2018.

Earlier in the same month that Bithumb was hacked, a lesser-known South Korean exchange CoinRail (90th in the world), also fell victim to a cyber attack which saw 30% of its traded coins stolen.

After the Bithumb hack, insurers were skeptical of cryptocurrency exchanges. One insurance industry official told Business Korea on June 25th, “The Korea Blockchain Association emphasized a stronger internal control system and security at the earlier sessions. But we cannot trust it as even the largest cryptocurrency exchange in South Korea was exposed to cyber attacks.”

The Korea Blockchain Association had begun discussions in June 2018 with another insurance firm as well as Hanwha to see how exchanges could take out a crypto policy. According to the association it has been in negotiating with insurers since April 2018.

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Bithumb Airdrop Causing $247 Million in Wash Trading Daily

Bithumb is conducting season 1 of its ‘Super Airdrop Festival‘, where it refunds traders 120% of trading fees. It has set aside a limit of KRW 1 billion per day for the refunds, which comes out to KRW 167 million (USD 149,000) of rewards each day. Clever traders have seized this opportunity to make profits by conducting wash trading.

Wash trading is when a user sets up two accounts, placing a sell order on one, which is bought immediately by the other. This generates fake trading volume on crypto exchanges and is commonly used to inflate trading volume stats to push crypto exchanges up the CoinMarketCap rankings. Due to the Bithumb airdrop, users now have an incentive to wash trade, since they can make easy profits.

Doing the math, Bithumb charges 0.3% fees, yielding a rebate of 0.36%. Therefore KRW 278 billion (USD 247.6 million) of wash trading can produce the KRW 1 billion limit for trading refunds. And this is exactly what’s been happening – at the time the airdrop reward resets every day, there has been a KRW 252 billion spike in Bitcoin trading on average for a moment, representing one person or many people jumping on the opportunity to make easy money via wash trading.

Bithumb has experienced tremendous problems since it was hacked in June 2018, resulting in the loss of USD 31 million of crypto and the shutdown of the exchange. It has just become fully operational again and has opened registration for new users. Simultaneously, it launched the trading fee refund airdrop.

These events give Bithumb the appearance of having strong liquidity, which attracts traders. It has shot up to #5 in the world on CoinMarketCap with over USD 450 million of trading volume. That means Bithumb’s true trading volume is over USD 200 million per day, much higher than it was before the hack.

In fact, the USD 200 million of real volume generates USD 600,000 of profits per day from trading fees, which is more than enough to pay for the airdrop with a nice profit on top. Perhaps Bithumb will continue doing the airdrop long term, since it is attracting real volume to the exchange and is, therefore, a profitable strategy.

 

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South Korean Gov Check Finds Security Vulnerabilities at Crypto Exchanges

The outcome of a recent inspection of 21 domestic cryptocurrency exchanges by the South Korean government has just been released.

The inspections were conducted in June and July as a follow up to previous inspections in January and March of this year. The inspections identified 17 out of 85 items as needing immediate focus, 11 of which concerned crypto wallet management.

What was clearly identified in the March inspection was the fact that many of the exchanges lacked adequate security arrangements which included dedicated security and management staff, a password management system, crypto deposit and withdrawal controls, and a system to monitor wallets for abnormalities.

In this latest inspection, the government agencies responsible for the checks clarified that only 11 out of the 21 exchanges had dealt with the outstanding short-term adjustments to their systems. Eight had improved wallet management systems. These were: Upbit, Bithumb, Korbit, Coinnest, Coinlink, Coinone, Coinplug, and Huobi Korea. A government statement revealed that:

“In the management of virtual currency wallets, most of the vulnerabilities in the business have not yet been improved.”

Twelve companies didn’t provide adequate security arrangements to address data leakage and loss of funds from cold wallets and ten companies failed to identify and monitor suspicious activity. Ten companies still lacked wallet back up and recovery systems for clients.

There will be a follow-up inspection in September to check that the identified issues have been corrected. In addition,  new exchanges will also come under scrutiny under the same guidelines. Kim Jong-sam, a spokesperson for the Ministry of Information and Communication stated:

“Because of the weak security of virtual currency exchanges, we should be careful in investing…We will continue to check virtual currency exchanges to improve security.”

Kim went on to point out that many cryptocurrency exchanges are operating with “sub-par security systems” and investors need to be careful when selecting a platform to trade on.

Despite the checks and implementation of strict guidelines, regional governments are forging ahead with plans to develop major hubs such as Jeju Island by imposing favorable regulatory frameworks for crypto startups. Clearly, these will also come under scrutiny from government regulators to ensure the security guidelines are maintained.

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South Korea’s Biggest Exchange Cleared of Insolvency Charges

Following the raid of South Korea’s largest cryptocurrency exchange UPbit on insolvency charges, an audit has confirmed that all of its digital currency balance sheets have not been subject to manipulation and the platform has the total funds it claims.

Officials took action in May after concerns were raised that UPbit was inflating its trading volumes while manipulating the balance sheets to match. South Korea’s Financial Services Commission and Korea Financial Intelligence Unit took documents and hardware from the exchange’s headquarters to appraise the details in line with the anonymous tip-offs claiming its insolvency.

A recent evaluation by one of the country’s largest accounting firms, Yoojin, declared that UPbit was operating with all of the declared assets, with the results of the audit published by Korean internet provider Kakao’s subsidiary company Dunamoo. While this has reassured many local investors using the platform, the lack of a response from the local government has led critics to query the legitimacy of the audit.

Details of the audit claim that the cryptographic screening shows UPbit has around 103% of the money based on the total needed to be paid to customers, with the aggregate funds of the exchange reaching 127% of the total that it holds for customers.

The president of Dunamoo Lee Seok-woo attested the authority of the results, saying UPbit has enough money to compensate all customers whenever they wish to withdraw their funds. He also noted that the exchange would comply with regular audits in the future to prove its financial conditions are fully legally compliant.

The recent hack of South Korean exchange Bithumb ignited mistrust with the platform, pushing UPbit to the country’s number one cryptocurrency exchange spot. Shinhan Bank-backed platform Gopax is expected to overtake the trading volume of both exchanges in the near future.

 

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World’s First Bank-Backed Crypto Exchange Opens For Trading

VCTRADE, the world’s first bank-backed cryptocurrency exchange, is now open for trading in Japan after its launch last month, reports Coindesk..

The exchange, owned by Japanese banking giant SBI Holdings, has now opened trading to users aged between 20 and 70 years, after only servicing limited pre-registered users, providing that they are resident in Japan. Corporate entities are still unable to use the exchange at this time.

At the original launch last month, SBI announced that the VCTRADE platform would facilitate the trading of the Japanese yen against Ripple’s XRP. The company’s Chairman and CEO Yoshitaka Kitao recently said that he saw Ripple as becoming a universal digital currency to compete with Bitcoin in the future, due to the digital currency’s payment platform for international money transfer and remittance services.

The delay in VCTRADE’s opening for business was due to the need to upgrade the platform following a USD 533 million hack against another Japanese exchange, Coincheck, earlier this year. These moves illustrate SBI’s continued investment across the region investing USD 460 million in its AI and blockchain fund. Kitao commented:

“There’s a lot of speculative demand around cryptocurrencies, which is why the price is going up so quickly, but people need to think about how these technologies are being used in real life and how they can improve people’s businesses.”

Earlier this year, it was revealed that SBI had planned to launch a new cryptocurrency exchange and was also investing in renewable energy wind farm cryptocurrency mining cryptocurrency and was working on improved 5G mobile connectivity and AI.

In other news from Japan, South Korean exchange giant, Bithumb, is hoping to get a licence to operate in the country, although with tougher cryptocurrency rules following the Coincheck and Monocoin attacks, it may have to jump through some hoops. Its own exchange suffered a hack of USD 31.5 million recently.

If Bithumb is successful, it would open a new office in February of 2019. The company is reportedly planning to extend its reach overseas launching new faster and efficient platforms for worldwide traders.

 

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South Korean Regulators Move to Tighten Rules After Exchange Hacks

In response to two major hacks this year, including the Bithumb exchange attack this week, the South Korean government has acted quickly with a new bill aimed at tightening regulations for cryptocurrency exchanges.

Choi Jong-ku, chairman of the country’s top financial regulator, the Financial Services Commissions (FSC), responded to the most recent attack on Bithumb, suggesting that the cryptocurrency system needs more stability and strengthened protection.

Korean source Newspim accuses Korean regulators of allowing cryptocurrencies to be in a “blind spot”, suggesting that a reporting system would block certain cryptocurrency crimes such as money laundering and ensure scrutiny of banks with more care, ensuring virtual accounts are more closely monitored.

According to the government, the new bill introduced in response to the more frequent attacks on South Korean exchanges and “will define a virtual currency exchange as a virtual currency handling business” with a focus on money laundering, adding:

“If the bill passes the National Assembly, a virtual currency exchange must be obliged to report to the Financial Intelligence Unit (FIU) as a virtual currency handling business and be regularly supervised by the FIU.”

Any obvious transgression of current regulations will then be immediately investigated by Financial Supervisory Service (FSS) and the FIU. The Act on Reporting and Using Specified Financial Transaction Information has already been submitted to the National Assembly in order to achieve these outcomes and tighten up government monitoring of South Korean exchanges.

Other amendments to current legislation under the proposed bill will require companies to store data for five years relating to any financial transactions conducted, and heavy fines of KRW 30 million (USD 27,000) have been suggested for illegal activity. Sanctions are also favored in response to exchanges failing to comply with the regulators, including dismissal of executive staff and suspending businesses.

Currently, in South Korea anyone with USD 30 can launch a cryptocurrency trading platform and, until these recent changes, government agencies and financial authorities have not been permitted to strictly oversee digital asset businesses, according to Yahoo.

Park Yong-kin, a National Assembly Committee member commented at the end of last year that the government shouldn’t leave exchanges unregulated as it would worsen the cryptocurrency sector. It appears that his sentiments have now filtered through to the government after the recent spate of attacks on South Korea’s exchanges.

 

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Korean Exchange Bithumb Loses $31M in Hack, Halts All Withdrawals

Bithumb announced on 20 June 2018 that it was hacked overnight, resulting in the loss of KRW 35 billion (USD 31 million) of cryptocurrency. For the time being, all cryptocurrency and fiat withdrawals are frozen, and Bithumb urges customers not to deposit any cryptocurrency since all of Bithumb’s digital assets have been moved into cold storage for safety. Bithumb says that it will cover the losses from its own money so customers don’t have to worry, and the exchange will re-open after a process of security review and enhancement.

Bithumb is the biggest cryptocurrency exchange in Korea with daily trading volume near USD 400 million, making it the 6th largest in the world behind Binance, OKEx, Huobi, Bitfinex, and Upbit. A total of 37 different cryptocurrencies are traded on Bithumb, so depending on which coins were stolen, it might take some time for the exchange to re-acquire customer’s cryptocurrency.

This is the second time in June 2018 that a South Korean cryptocurrency exchange has been hacked. A little over a week ago on 11 June, Coinrail was hacked, losing USD 40 million of cryptocurrency. Coinrail is a much smaller exchange than Bithumb and was ranked only 90th in the world with daily trading volume of USD 2 million, so the hack was too much for the exchange to handle and it remains disabled as of this writing. The Coinrail hack was blamed by many as the impetus for a 10% decline in Bitcoin’s price on the same day.

The news of the Bithumb hack is breaking as of this writing so market impact remains to be seen, but already Bitfinex has dropped by over USD 100, roughly a 1.5% price move. Bad news like a major cryptocurrency exchange being hacked has been known to cause steep negative movements in the Bitcoin market in the past, so the drop probably isn’t over.

It was reported earlier in 2018 that long-time feuding neighbor North Korea has been actively hacking cryptocurrency users and exchanges in South Korea as a means to obtain cryptocurrency so that they can circumvent international sanctions. No doubt there will be some speculation that North Korea might be the reason two South Korean cryptocurrency exchanges have been hacked in such rapid succession this month.

 

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Bithumb’s Clean Bill of Health Could Lift Crypto in South Korea

Bithumb, the largest cryptocurrency exchange in South Korea, has been cleared by local financial authorities and the National Tax Service (NTS) of illicit activities, tax evasion, and suspicious business operations, reports CCN.

The South Korean government had been monitoring the exchange, along with UPbit, another of the country’s main exchanges, after investors had expressed concerns. Both companies were then investigated for potential malpractice and suspicious business activities.

It was found that apart from Bithumb being ordered to pay USD 28 million in taxes, neither the NTS, Financial Services Commission (FSC), or Korea Financial Intelligence Unit (KFIU), along with other government agencies could find any evidence of improper practices regarding either company.

According to the NTS, the agency closed its investigation into Bithumb in late April, imposing a USD 28 million tax on the company, this after the three month Seoul investigation involving seizure of various computer files, devices, and information necessary to run a full audit on the exchange’s cryptocurrency holdings and past activities. An NTS spokesman indicated:

“NTS initiated several investigations into Bithumb between 2014 and 2017, and over the past four years, Bithumb has continuously paid all of the taxes imposed to the company without any conflict with the NTS. While a USD 28 million tax was imposed onto Bithumb, no evidence [of] tax evasion and illicit activities were shown and the NTS closed the investigation into Bithumb officially, clearing the company.”

After a 171-fold increase in the company’s profits within a 12-month period, supported by a rapid surge in demand for cryptocurrency in the local market the NTS decided to take action. The agency commented that it wanted to very cryptocurrency company to declare all holdings, be transparent with their bookkeeping and declare their taxes.

The clean bill of health for Bithumb is a boon for the industry as a whole in South Korea. As the largest in the country, the exchange is synonymous with the whole concept of cryptocurrency and represents its successes and failings. Commentators suggest that the investigation clearing Bithumb of any wrongdoing will inject much-needed trust in the crypto space.

 

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Bithumb: 43% Investors Say It’s Time To Hodl With Over-50s Going Long Term

A recent survey of cryptocurrency investors by South Korean exchange Bithumb revealed that many intend to ‘hodl’ their funds over a long period of time, according to Bitcoinist.

The survey of roughly 2,500 investors showed a huge 42.8% were in for the long ride, with only 27% interested in short-term profits. It also revealed that13.% had bought cryptocurrency purely as investment, while another 10.5% were focusing on marriage and property-related goals.

This research is in keeping with general industry consensus that cryptocurrency holders, particularly Bitcoin, are moving into a protracted ‘hodl’ scenario, with coins currently in a buying market.

“As virtual currency continues to be recognized as an asset in major industrialized countries, the perception of virtual currency investment by domestic investors is gradually maturing,” Bithumb commented, as quoted by various Korean news outlets.

The figures varied according to age, but its clear that older groups were planning on holding their cryptocurrency for the future, with 49.1% of this group over 50 years of age. The figures show that only 30% of millennials were planning to hold their coins for the future.

It also appears that South Koreans are not overly concerned about paying tax on their cryptocurrencies. Some 39.5% would keep their investment even in the event of needing to pay capital gains tax – 11% more compared to last year – while only 13.1% said they would “stop investing” in the face of such obligations. Bithumb users also welcomed the South Korean government’s current moves to regulate the industry, including taxation, as they see regulation as the key to future cryptocurrency adoption in the future.

Bithumb has recently banned trading with 11 countries, including North Korea, considered by some to be a move towards improving its profile in the crypto world by adhering to global financial community norms. The South Korean company appears now to want to form associations with compliant members.

 

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Brock Pierce Plugs “Puertopia” at Futurama Crypto Summit

The 2018 Futura Blockchain Summit held last month in Dubai has been hailed by many guests as the best crypto convention ever, according to Bitcoinist.

The summit brought together more than 300 leaders of the crypto world, including Bitcoin entrepreneur Brock Pierce.  Reportedly it was the largest convention of the cream of crypto society assembled together, including opinion leaders, famous businessmen, investors, and cryptocurrency enthusiasts.

Futurama was pitched as being:

“A  unique, 4-day summit, giving an impressive networking experience. Futurama unites the best crypto leaders and most exciting projects through pre-screening and personally chatting with each presenter since the highest quality of the event and the involvement of each participant can be reached only in this way.”

Brock Pierce entertained the assembled with his views on his Puerto Rico project “Puertopia” as the summit got underway, explaining:

“Our main aim is to create the city of the future. In particular, I’ve been searching for the place where we can do the real effect and provide help. There are a lot of problems in Puerto Rico. 20,000 younglings and ambitious people excited to change the planet and make the difference, they just need a chance to do it. I hope you will find the opportunity to come here and see it with your own eyes. It’s a beautiful place.”

Joshua Hong opened the official summit part with the incredibly warm speech and fellow panelist Miko Matsumura focussed on the role of AI in the decentralized world.  Other top speakers were Nicholas Merten, the founder of DataDash, Michael Suppo, also well-known as Suppoman, running a YouTube channel with more than 147,000 active followers and Evan Luthra, young investor, entrepreneur and motivational speaker who spoke for Google and Blackberry.

One of the most innovative startups at the event was reportedly GoByte, a project that implements a commercial payment and business solution. Exchanges Bithumb, Bitinka, and Coinsbank were also represented in panel discussions.

It wasn’t all about the crypto space.  A convoy of 50 land cruisers descended on the desert as part of a dune safari, hot air balloon flights were the order of the day, as was a star-studded yacht party and a Desert Rose Party which brought the crypto milieu together to relax after the panel events with no expenses spared. Investors mixed together and discussed the big thing, whilst the more active guests danced amongst fellow crypto personalities before fireworks lit up the desert sky.

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