The South Korean government has started to focus on fostering and regulating the local cryptocurrency market to protect investors and ensure businesses have robust infrastructure to secure sensitive information.
Major Banks Supporting Cryptocurrency Exchanges
Earlier this month, several officials in the South Korea Finance Ministry told local investors that banks and financial institutions within the country will begin cutting off money flow into cryptocurrency exchanges and trading platforms.
Investors became increasingly concerned when Kookmin Bank, the country’s biggest financial institution, stopped providing virtual bank accounts and banking services to cryptocurrency exchanges.
On South Korean bitcoin trading platforms, each user is granted a virtual bank account issued by local banks. With it, traders can initiate trades and execute orders without directly moving funds to their original bank accounts. Instead, traders can choose to keep their funds on virtual bank accounts on the exchanges to swiftly trade cryptocurrencies to fiat.
Korbit and Bithumb, two of the largest cryptocurrency exchanges in the market, revealed this week that Shinhan Bank along with five other major banks in South Korea will begin supporting cryptocurrency exchanges with virtual bank accounts. As such, by the end of this month, new users will be able to open accounts on trading platforms and existing users will be permitted to trade large volumes once again.
Previously, the Justice Ministry, which was heavily criticized for its premature statement on a cryptocurrency trading ban bill that was later refuted by the South Korean government, suggested that it will request banks to cut services to both investors and exchanges in the cryptocurrency market. However, with the exception of Kookmin Bank, all of the country’s major banks will continue to support cryptocurrency exchanges.
Cryptocurrency Exchanges Fined For Poor Security Measures
Today, on January 24, eight cryptocurrency exchanges in South Korea including Korbit and Coinone were fined $130,000 in total for implementing poor security measures. The South Korea Communications Commission (KCSC) penalized local exchanges for violating the Information and Communication Network Act and Privacy Act.
The KCSC, which led an investigation into 10 cryptocurrency exchanges in cooperation with the South Korea Technology, Science, and Information Ministries, discovered that the majority of exchanges have had poor security breach prevention systems, unsecure user information storage protocols, and unreliable storage technology for sensitive user information.
The eight cryptocurrency exchanges each received a fine in the range of $10,000 to $25,000. Analysts stated that the fines were significantly small relative to the magnitude of the business local cryptocurrency exchanges operate. The KCSC noted that small fines were imposed because poor security measures on cryptocurrency exchanges were discovered for the first time and since the exchanges have been provided with a 30-day window to implement stronger systems.
The strict regulation of the South Korean cryptocurrency market by the country’s Finance Ministry and KCSC is an optimistic sign for the long-term growth of the industry, because it demonstrates the unwillingness of the government to ban the market and cryptocurrency trading.