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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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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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South Korean Firms Actively Adopting, Generating Blockchain 3.0 Tech

Third-generation blockchain projects are in hot competition in South Korea’s bustling blockchain and cryptocurrency industries.

The term “Blockchain 3.0” has been cropping up a fair amount in 2018 to a mix of skepticism as to when it will truly arrive, with projects such as EOS and several others supposedly leading this race. In the case of South Korea, there is quite some fanfare as domestic companies begin to pair up with these new technologies.

Third generation

Blockchain 1.0 refers to the first and early technologies which were simply cryptocurrencies; Litecoin and Bitcoin are prime examples of this era. Blockchain 2.0 came about as developers began to understand that the technology could do much more than document transactions.

Ethereum is often touted as the beginning of the 2.0 generation with the introduction of smart contract technology on a blockchain and adoption of blockchain in enterprises. Industries grew given the versatile applications of smart contracts.

This new generation of Blockchain 3.0 is thought to be the catalyst for mainstream adoption. This latest round of solutions and platforms are said to address the issues of their predecessors with higher scalability, interoperability, governance and many others on the list.

As reported by Business Korea on 27 September, there a handful of blockchain enterprises that are becoming well positioned in South Korea’s markets, as well as one of its largest cryptocurrency exchanges, which is preparing a new blockchain platform through its subsidiary. These would all fit into Blockchain 3.0 descriptions.

Enterprise adoption

EOS has found itself being adopted by Neowiz Co, a leading games developer in South Korea who are now developing video games on EOS. The EOS network is pegged by Weiss Ratings Agency as one of the most innovative blockchain projects out there and is becoming increasingly favored by the gaming sector.

Orbs, an “Infrastructure-as-a-Service” (IaaS) platform from Israel, claims to be an improvement upon Ethereum. It uses the network’s best features while being faster, and includes a new transaction fee model among other interesting features.

This project is drawing a great deal of attention now with a strategic partnership in place with Ground X, a blockchain subsidiary of Kakao Corp, who also own one the world’s largest cryptocurrency exchanges, Upbit.

According to the Business Korea report, it is “highly likely” that Orbs will be collaborating with a blockchain payment project named Terra, a South Korean stablecoin project.

Additionally, Kakao is preparing to unveil the testnet for a blockchain platform developed by Ground X. “Clayton” is said to debut in October and is also in direct competition with Naver, South Korea’s largest internet content service company. Naver has produced the Link Chain platform, a payment and compensation method for numerous services including games, commerce, and content.

Blockchain enterprises in South Korea are receiving encouraging levels of support from the government as the nation seeks to formalize regulations and legislation for the industry. Despite being less in place than Malta, South Korea still a thought leader to other nations also seeking to enter the space.

 

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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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Multi-Billion Dollar Conglomerates Enter South Korea Cryptocurrency Space

South Korean cryptocurrency exchanges might be looking at a boost in funding as several of the country’s largest multi-billion dollar conglomerates are making their way into the market.

This news comes shortly after a period of uncertainty after a significant January dip, prompted by narratives from news outlets as speculation surrounded the government’s stance on cryptocurrency regulations.

Now, some of the wealthiest insurance, telecommunications, gaming and internet conglomerates in the country are gearing up to fund the next generation of South Korean cryptocurrency exchanges.

Why now?

Positive reports indicate that initial coin offerings (ICOs) may, in fact, have a safe space to operate in, though these would only be available to domestic investors. Additionally, the discussion of how to proceed forward with ICOs and crypto-trading has since been unravelling further.

At the end of January, Kim Sang-Joo, chairman of South Korea’s Fair Trade Commission, made it clear that in a radio interview that it wouldn’t be possible for the South Korean government to shut them down, stating:

“In reality, it is impossible…Whether a violation of the e-commerce law is likely to happen relatively quickly, the e-commerce law does not have the right to close the virtual exchange.”

Who is involved?

NHN Entertainment Corporation (NHN) is the largest gaming conglomerate in South Korea worth USD 1.29 billion.

Having already funded China’s previously dominant cryptocurrency exchange OKCoin; according to OKCoin president Cho Jeong-hwan, the exchange is to be launched in March with 60 Cryptocurrency-to-Korean Won (KRW) pairings.

Another set of major players come from the companies behind Upbit, the fourth largest exchange in the world and the largest in South Korea. It is run by Dunamoo, a subsidiary of Kakao, the largest Internet company in South Korea. Together the pair are worth just over USD 10 billion, and their crypto-only exchange has proven to be a hit with traders.

The largest of the three come from NXC, the parent company of South Korea’s largest gaming company Nexon, which is worth USD 11.5 billion and owns the country’s second largest cryptocurrency exchange Korbit.

With them is SK Telecom, Korbit’s first significant investors and South Korea’s largest telecommunications company worth approximately USD 17 billion.

New developments make for bright horizons

The discussion of finding a means to create the right framework for cryptocurrency exchanges and ICOs is happening and could be ramped up by the advances of huge investors into the cryptocurrency space.

Moments such as these indicate an exciting new period for a country that feverishly trades cryptocurrency, and could bring good tidings for the cryptocurrency community across the globe if South Korea can prove that blockchain and related products are compatible with existing systems.

 

 

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