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7 South Korean Exchanges Pass Security Inspection Checklist

7 South Korean Exchanges Pass Security Inspection Checklist

The South Korean Ministry of Science and ICT reported yesterday that only seven cryptocurrency exchanges including Upbit, Bithumb, Gopax, Korbit, Coinone, Hanbitco, and Huobi Korea have passed the security inspection checklist.

A survey was conducted by the Ministry of Science and ICT, the Korea Internet & Security Agency and the Ministry of Economy and Finance, during the period of September to December of 2018 to evaluate the security performance of cryptocurrency exchanges in the country.

The inspection covered the following areas: administrative security, operational environment security, network and account security, database & backup security, and wallet security.

Out of 21 cryptocurrency exchanges that were inspected earlier last year for security compliance, only seven passed the improvement recommendation, leaving the remaining 14 labeled as “vulnerable” to one or more of the 85 security checkpoints. “The 14 exchanges are vulnerable to hacking attacks at all times because of poor security,” the ministry said. Moreover, 17 new exchanges that were inspected for the first time, did not meet the cutoff either. This brings the total of exchanges scrutinized to 38.

South Korea is home to over 100 cryptocurrency exchanges and due to the number of security breaches that have led to the loss of millions of dollars of user assets on exchanges, the Korean government decided to carry out a survey to determine the fitness level of these exchanges.

It would seem the agency expects more of this hacks to occur this year, and are prepared to mitigate the severity of the damage if not completely averted through these security inspections. Director of information security policy at the Ministry of Information and Communication Oh Yong-soo said: “This year, cyber attacks targeting encrypted money are expected to continue”. Yet, most of the inspected exchanges “are still vulnerable”, and there a lot more exchanges are out there whose security status is currently unknown.

The South Korean nation has been pulling resources to ensure the standardization of the industry, a part of that effort includes setting up a representative committee to oversee legislation for the industry and suggest possible adaptive measures to national laws. Though leaning on the side of caution, so far, the nation appears to be a friendlier territory for the industry than some other Asian countries.

Last month in Japan, the Financial Services Agency (FSA) reported having received 190 cryptocurrency license applications from exchanges as 2019 approached. Regulation and standardization seem to be the way forward in the industry.

 

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7 Major South Korean Exchanges to Create “Healthy Crypto Ecosystem”

7 Major South Korean Exchanges to Create

As the South Korean government continues to work on institutionalizing cryptocurrency exchanges, seven major players have signed an ‘Agreement for the creation of a sound cryptocurrency ecosystem’.

Local media reports that the exchanges, Upbit, Bithumb, Korbit, Coinone, Gopax, Coinplug (Cpdax), and Hanbitco, have stated the accord’s aim is to not only to create a healthy ecosystem but also to prevent crime and protect investors by creating a sound ecosystem and preventing money laundering.

Information sharing and real-time monitoring of unusual transactions will become a major focus of the group’s activities along with more check and balance measures such as restrictions on unverified customers. Financial Services Commission (FSC) head of financial innovation, Kwon Dae-young, declared that the government’s position had not changed much since it was revealed last December:

“We are trying to institutionalize [cryptocurrency exchanges] but before we do, we have to answer the question of how to deal with the damage and tears of many virtual currency investors. We must see if any of the projects that can help the people in their daily lives have been presented. Trust and authenticity are important.”

The new agreement signed by the seven exchanges demonstrates that industry aims appear to be very much in line with the government’s own. Ubit’s de facto voice, Dunamu Inc’s Lee Seok-woo, proposed his own protectionist measures to bring South Korea’s exchanges into line. Lee suggested minimum qualifications and standards for the industry should be bought into play, AML/KYC guidelines should be observed and a new exchange registration system could be introduced: “If you [crypto exchange] cannot meet the standard after a six-month or one-year grace period, you should close it.”

Last month, 40 international and South Korean experts formed another group, the Blockchain Special Committee, which plans to establish a blockchain hub in South Korea’s North Gyeongsang Province, also known as Gyeongbuk. Members of the association will be tasked with deliberating and consulting on the creation of “mid-to-long-term strategies” that will foster the blockchain industry.

 

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North Korean Cybercriminals Target Individuals After Tighter Crypto Exchange Security

North Korean Cybercriminals Target Individuals After Tighter Crypto Exchange Security

North Korea-based cybercriminals have cast their attention on to individual cryptocurrency investors and away from larger exchanges, according to a report from the South China Morning Post.

Founder of cyber warfare research group IssueMakersLab, Simon Choi, has confirmed the growing change in tactics by cybercriminals from South Korea’s northern neighbor. This, after a step up to tighten security controls by high-value financial institutions and centralized crypto exchanges over past months. According to the Post:

“Direct attacks on exchanges have become harder, so hackers are thinking about alternatively going after individual users with weak security. They targeted staff at the exchanges, but now they are attacking cryptocurrency users directly. With the US, the UN and others imposing sanctions on the North Korean economy, North Korea is in a difficult position economically, and cryptography has come to be seen as a good opportunity.”

Hackers have now begun to infect individuals’ computers with infected email attachments as a means of stealing crypto assets. Once the computer is compromised, the hackers have free range access private files and keys. Kwon Seo-Chul, the CEO of Cuvepia, has discovered 30 such cases of individual cryptocurrency investors being targeted recently. He commented that there may be more just around the corner with all of the cited incidents occurring very recently, since April of this year.

One of the major problems appears to be that there is no way of reporting such attacks, most of which have seen seasoned cybercriminals targeting private South Korean investors. This is resulting in hackers becoming braver and less concerned about intervention from the authorities. Kwon explained that the victims were just “just simple wallet users investing in cryptocurrency” adding, “When cryptocurrency wallets are hacked, there is nowhere one can make complaints, so hackers are increasingly hacking into digital currency accounts.”

South Korea has frequently accused the Pyongyang government of state-backed cybercrime following a number of high profile incidents and a recent increase in North Korea’s cryptocurrency mining activity. NSA cybersecurity official Priscilla Moriuchi asserts:

“North Korea has pursued other avenues for obtaining cryptocurrencies as well, including mining of both Bitcoin and Monero, ransom paid in Bitcoin from the global WannaCry attack in May and even commissioning a cryptocurrency class for North Korean students in November.”

North Korea is currently on the South Korean Exchange giant Bithumb’s list of banned countries after Kim Jong-un’s Pyongyang regime has repeatedly been accused over a period of years of heists and hacks against cryptocurrency exchanges, banks, and multinational organizations in attempts to raise desperately needed hard cash for its failing economy.

 

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Fiat Pairs Outgunned by Crypto-to-Crypto Trading

A new cryptocurrency exchange review has reported that crypto-to-crypto exchanges out-peaked fiat currency pairs between mid-September to mid-October of this year.

CryptoCompare’s October 2018 Exchange Review records average trading volumes of exchanges offering crypto-to-crypto trades peaked at USD 7 billion a day compared to fiat currency pair volumes only hitting USD 4 billion, showing that pure crypto exchanges have been leading spot trading volumes. BitMEX has been accounting for about 90% of Bitcoin futures trading volume.

In terms of actual numbers, the balance of those exchanges offering fiat pairs and pure crypto-to-crypto trading is fairly equal, currently standing at 63 to 61 but with the spread of trading volume at over 2-1 in favor of pure crypto trading.

Binance CEO Changpeng Zhao suggests that fiat exchanges take longer to set up as some aspects are reliant on exterior forces beyond their control such as banks accounts and fiat gateways. Zhao remarked, “It’s a lot more tricky than pure crypto because, with pure crypto, we control everything; the blockchain does not reject us.”

Elsewhere in the report, it was noted that regulated exchanges such as the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) had returned relatively low Bitcoin futures trading volumes and that BitMEX and BitFlyerFX had averaged just under a quarter of trading volume with BitMEX representing over 90% of the futures market.

South Korean exchange Bithumb has seen a surge in trading volumes after the recent BK Global Consortium takeover. With daily trading volume near USD 400 million, it is the sixth-largest in the world behind Binance, OKEx, Huobi, Bitfinex, and Upbit. A total of 37 different cryptocurrencies are traded on the exchange. The report also indicates that BTC to Korean Won (KRW) trading now represents a tenth of the total Bitcoin trading volume among the top five fiat currencies.

The Intercontinental Exchange (ICE), which operates 6 clearinghouses and 12 stock exchanges including the New York Stock Exchange (NYSE), has announced that physical Bitcoin futures will go live on 12 December 2018 on their first crypto exchange, Bakkt. Physical Bitcoin futures could lead to the long-awaited rally major rally driven by institutional investments.

 

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Singapore Token Day Puts Crypto Center Stage on Bitcoin’s 10th Birthday

Singapore Token Day celebrated Bitcoin’s 10th anniversary with its own event to promote cryptocurrency and blockchain adoption on the South East Asian peninsula.

The organizers promised that Singapore Token Day would be a national event lasting over two weeks between 31 October to 18 November, with a view to informing the uninitiated about all things cryptocurrency. The hope is that the event will give Bitcoin and other cryptocurrencies a springboard to increase its profile among the public.

Earlier this year, Singapore’s Infocomm Media Development Authority (IMDA) launched a blockchain challenge rewarding winning projects with development funding as part of its long-term plan to back cryptocurrencies and new technology. The city center has become a venue for cryptocurrency promotional events. In May, eyebrows were raised on the day when Bitcoin banknotes appeared at a major shopping center, readily available in denominations of BTC 0.01 (USD 98) and BTC 0.05 (USD 485), each containing a Samsung Semiconductor S3D350A chip.

This event has attracted 30 large retailers to Chinatown and allowed customers to purchase goods and services using a range of cryptocurrencies using organizer Bizkey’s Point of Sale (POS) device. This week hopes to raise the numbers of Singaporeans using Bitcoin, while also encouraging companies to improve their services through DLT.

Bizkey estimate that 10,000-15,000 Singaporeans own one or more cryptocurrencies. Although it is not yet widely used in the retail sector, the government continues to keep cryptocurrency on its legislative radar due to its obvious advantages in reducing the cost of money transfers and the speeding up transaction processes.

The Monetary Authority of Singapore (MAS) has been largely responsible for cryptocurrency’s increase in popularity, due in part to a clarification at the end of last year which outlined the distinctions between different tokens and their uses. The result was an increase in ICOs in the first few months of 2018 with 56 being offered in the city raising more than USD 1 billion in total from institutional and retail cryptocurrency investors – a huge increase on the previous year.

The local market has been further buoyed over the past few weeks by the news that South Korean cryptocurrency exchange Bithumb sold majority control for USD 354 million to a Singapore-based medical group. Bk Global Consortium acquired the 51% share in the exchange necessary to give it overall control. The deal was signed by BK International Consortium, a blockchain investment company formed by BK International, a plastic surgical procedures clinical team in Singapore.

 

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Bithumb Acquired for $354 Million by Singapore Medical Group

South Korean cryptocurrency exchange Bithumb has sold majority control for USD 354 million to a Singapore-based medical group, according to the latest Reuters update.

Bk Global Consortium has acquired the 51 per cent share in the exchange necessary to give it overall control. The deal was signed by BK International Consortium, a blockchain investment company formed by BK International, a plastic surgical procedures clinical team in Singapore.

The deal means that Bithumb, South Korea’s largest crypto exchange by volume, passes over its controlling stake from BTC Holdings, who had previously held 76% of the company’s equity, to the new stakeholders.

Bithumb, with daily trading volume near USD 400 million, is the sixth-largest in the world behind Binance, OKEx, Huobi, Bitfinex, and Upbit. A total of 37 different cryptocurrencies are traded on the exchange.

The new premier stakeholder in Bithumb is plastic surgeon Kim Byung Gun, a South Korean cryptocurrency investor who had already launched his own ICO consulting firm and platform last August. The deal with BK global priced the major South Korean exchange at over KRW 1 trillion won (USD 880 million). News Asia observed:

“Kim, who demonstrated his multinational management ability in the field of medical care, has invested in fintech [and] blockchain… companies in Singapore.”

Although beset by a major hacking in June of this year resulting in the loss of KRW 35 billion (USD 40 million), the exchange has still made significant gains through the first half of 2018 estimated to be around USD 35 million. The suspension of withdrawals and the opening of new accounts, however, led to a significant drop in volume at the time.

The new major stakeholder is setting his targets high, with plans to create a new platform similar that that of Binance and San Francisco exchange giant Coinbase. Kim also wants to create a blockchain e-commerce system in partnership with Singapore’s e-marketplace Q2 along with talk of a fiat-backed stablecoin being developed in the future.

 

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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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