On December 10, Lee Seok-wu, the CEO of Dunamu, the parent company of South Korea’s largest crypto exchange Upbit, said that regulation is important to establish industry standards.
During a meeting with several members of the Congress and the Financial Services Commission (FSC) hosted by Upbit, Bithumb, Gopax, Korbit, and Coinone, five of the biggest digital asset trading platform operators in the local market, Lee said:
“The role cryptocurrency exchanges play in the cryptocurrency and blockchain ecosystem is crucial and the industry with the government have to establish regulatory guidelines to ensure that the local market is operated by exchanges that meet high standards.”
The Upbit CEO emphasized that the regulatory frameworks implemented by the government to govern exchanges, especially in the area of Know Your Customer (KYC) and Anti-Money Laundering (AML) can be improved.
What Needs to be Improved?
According to Lee, the following areas of the cryptocurrency market and policies surrounding it need to be addressed quickly, in the short-term:
- Low standards of security implemented by small exchanges leading to hacking attacks
- Poor KYC/AML policies disallow crypto exchanges from monitoring transactions
- Regulatory guidelines must be strengthened to ensure platforms are on the same page
Speaking to high profile government officials, lawmakers, and regulators, Lee explained that the cryptocurrency market is characterized as an insecure and risky market to invest in due to various hacking attacks and security breaches small crypto exchanges fall victim to on a regular basis.
Lee told government officials that unless industry standards are established, minor digital asset exchanges that are solely focused on maximizing profit will continue to emerge and damage the reputation of the entire local market by rendering the efforts of the good actors in the space like Upbit unnecessary.
On November 27, Upbit became the first crypto exchange in South Korea to receive an approval from the Korea Internet and Security Agency (KISA) for having world-class security measures and protocols in place.
With the information security management system (ISMS) license the exchange obtained, under existing regulations, the company is recognized as a major information corporation that is approved by the government.
But, all of the efforts Upbit, Gopax, Korbit, and other major cryptocurrency exchanges have made in the past few months could demonstrate little progress in recovering the public’s trust towards the digital asset market if minor exchanges continue to suffer security breaches by losing the funds of investors.
“Due to the lack of regulatory guidelines on cryptocurrency exchange development, small businesses are aggressively launching exchanges that do not have adequate internal management systems and security protocols in place, negatively affecting the public image of the local cryptocurrency market.”
Lee heavily emphasized that if the government provides a simple regulatory framework that prevents small exchanges from opening without sufficient security measures in place, most of the hacking attacks can be avoided in the future.
Is South Korea on the Right Track?
South Korea remains as one of the few countries alongside Switzerland, Singapore, Japan, the U.K., and the U.S. that are actively implementing new policies to facilitate the growth of its local blockchain and cryptocurrency ecosystem.
If the government continues to communicate with both large and small companies in the industry in an attempt to better regulate the space, the country could compete against bigger markets and potentially allure talent, investors, and startups into the local sector.