All South Korean crypto exchanges fail regulatory audits

Another hit for crypto exchanges of South Korea — every single one of them has failed their regulatory “consulting” audits.

Failed expectations

Even the biggest of the exchanges, namely Korbit, Bithumb, Upbit and Coinone, didn’t pass their audits. This comes a month before Korean authorities are supposed to get new crypto regulations rolling.

The Financial Services Commission (FSC) along with several government ministries and state-owned IT companies have been conducting a “complete investigation of corporate accounts, as well as exchanges’ coin management and investor protection protocols,” since June.

In order to complete the series of audits, the Commission has drafted a number of police officers, as well as external contractors from the private sector, including security experts and network specialists. And no exchange has passed its audit tests.

For example, several exchanges were found to be engaged in fraudulent banking operations.

The FSC found that out of 33 exchanges, only 25 had gained information security management system accreditation. None of the trading platforms received real name-authenticated banking contracts needed to continue trading after 24th September.

According to the regulator, there are no standards in place for listing or delisting tokens, with outdated fraud detection systems in every exchange.

The Commission has warned businesses that in case any of them fail to remediate the situation, perpetrators will face prosecution with prison sentences of up to five years or a fine of up to ₩50 million (~£31,576).

Hard times for Korean crypto industry

The South Korean government has announced new financial regulations regarding cryptocurrencies at the end of July. Feeling their existence threatened by this change, several exchange companies decided to file a complaint against the state, which seems to have placed their whole industry into the banks’ hands.

On 30th January 2018, South Korean authorities banned anonymous cryptocurrency trading in the country. Every trader is required to identify themselves with their bank account. The name of the account holder on the exchange must match the name of the account holder.
The FSC has previously warned that only the “big four” Korean сrypto exchanges could be left standing by the end of September. In light of recent events even that prediction can be considered an optimistic scenario.

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DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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