12 South Korean crypto exchanges ordered to rewrite contracts
South Korea’s Fair Trade Commission (FTC) came down hard on a handful of cryptocurrency exchanges. This week, the agency reportedly ordered 12 different exchanges to tear up the contracts that their users signed, and to start over from scratch. FTC ruled that the contracts didn’t provide the necessary consumer protection required by law, according to a Yonhap report.
The contracts, referred to as adhesion contracts, were simple boilerplate contracts that provided virtually no security to users. The contracts were written in such a way that users wouldn’t be able to withdraw their deposits and they would be liable for all losses to the company when they decided to terminate their memberships.
Adhesion contracts are typically not open to negotiation. The provisions of the contract are set, and the signing party isn’t given the opportunity to dispute any provision. They are most often seen in contracts for land or automobile purchases, mortgages and consumer credit.
South Korea has gone through a number of changes regarding cryptocurrencies recently. In January, there was fear that the digital currency could be banned completely after Park Sang-ki, the country’s justice minister, expressed his desire to fully shut down the cryptocurrency business. The chairman of the FTC, Kim Sang-Joo, has repeatedly spoken out since then, as has South Korea’s President Moon Jae-in. They have been reassuring investors that cryptocurrency isn’t going anywhere, but that the industry will be the target of increased regulation.
According to the FTC chairman, banning cryptocurrencies wouldn’t be legal. At one point, Kim stated that shutting down cryptocurrency exchanges wasn’t realistic, saying, “Based on electronic commerce law, the government does not have the authority to close down cryptocurrency trading platforms.” The threats of exchange closure caused cryptocurrency values to fall drastically as many investors anticipated that exchanges in other countries might be forced to follow suit.
South Korea has been actively pursuing measures to help the cryptocurrency industry grow, but under strict guidelines. At the end of January, it implemented legislation designed to halt anonymous trading on domestic exchanges and the country continues to advance at a steady pace. It now ranks third in cryptocurrency trading, behind U.S. and Japan.
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