Now that the South Korean government has decided not to ban cryptocurrencies, it seems like it is stopping at nothing to ensure that it is covering all its bases and ensuring that the industry complies with all requirements proposed by the jurisdiction.
In its latest move in this regard, the government fined eight cryptocurrency exchanges on account of not maintaining proper security requirements, even after considering the large number of funds that they handle each day for their clients in the form of cryptocurrency.
This move came in the wake of a major hack endured by Japanese exchange Coincheck, which had been robbed for more than $500 million in NEM (XEM) as a result of the hacking incident.
Not maintaining up to date security despite imminent risks
As reported earlier, during the phase of determining the effects of cryptocurrencies and deciding how to handle this new financial market, the government of South Korea had been going through investigative measures for various cryptocurrency exchanges in the last quarter of 2017.
During the investigation, the government officials closely went through various aspects of these exchanges including but not limited to the regulatory and security risks that they posed to affiliated parties, this was when these lapses in security measures came to light.
Out of the ten cryptocurrency exchanges being investigated, eight were found in violation of necessary security measures.
Said violations ranged from not having up to date security systems to negligence in protecting customer passwords and other pertinent information.
Coinone and Yapian, for instance, were hit with penalties totaling more than $50,000 for not meeting the requirements to store private data effectively (including account passwords). It was also mentioned that these exchanges had not identified or sorted those accounts differently that had been inactive for more than a year.
Korbit and Upbit – two of the most popular exchanges in South Korea – received penalties for $20,000 each, the former for not having sufficient systems in place to even detect a security breach, while the latter because it violated the Privacy Act followed in the country.
Bithumb, one of the exchanges that had been investigated, remained unharmed by any penalties and stood as one of two exchanges that held this distinction among these reports.
Reports also suggested that, to some South Korean officials, the fine amount is not sufficient enough. These officials allegedly think that because these exchanges make way more in profits, they should be held accountable with stricter fines for being negligent.
It could reinforce security measures
While the news would have been difficult for these exchanges, it seems that the authorities needed to take such measures to remind the exchanges of the threats that lurk around for them and their customers.
With the growing cyber attacks on cryptocurrency exchanges – especially those from South Korea – it is essential that any entities which work on that front leave no stone unturned to keep themselves and their stakeholders protected from unforeseen events.
Such measures by the government, while sounding harsh, could actually go a long way in ensuring that security details are always taken care of and not neglected in any manner.