South Korean crypto exchanges make dramatic changes to terms of use

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In a move to protect the digital assets of consumers, five cryptocurrency exchange services in South Korea have increased their own responsibility, falling in line with the demands of regulators in the country. This came as the exchange services were forced to update their terms of service, accepting that they would take full responsibility for the liability related to potential hacks and service issues.

According to the Yonhap News Agency, the Fair Trade Commission reported on June 17 that the five had made these changes in response to a directive from the agency that governs crypto exchanges. Bithumb, one of the largest cryptocurrency exchange services in the country, has already been hacked twice in the last 12 months, losing as much as $51 million since June 2018.

Initially, Bithumb refused to compensate users for the loss, explaining that their terms and conditions remove liability for the company unless they were found to be “willfully or grossly negligent.” However, after the hack in June, they have been willing to compensate users for the losses.

The new terms of service should give users a greater sense of confidence that they can count on their assets being protected by these exchange services. Prior to this change in the agreement terms, most of the exchange services within the country refused to reimburse users unless it could be proven that their systems were somehow at fault. This has removed the liability of many of the companies in recent court decisions.

These kinds of decisions have become increasingly unpopular because of recent attacks on the exchange services. In May, Upbit was attacked by what appeared to be North Korean sponsored actors looking to breach the exchange services security using a phishing scam. Right around the same time, it was reported that many of these exchanges within the country were suffering significant losses as a result of these breaches. These losses were often dumped on users, absolving the liability of the exchange services themselves.

In addition to requiring the new terms of service, the government has stepped up its efforts to ensure that these exchanges are safe from attacks. From September to December of last year, the government inspected 21 separate crypto exchanges, reviewing 85 different security protocols, yet they discovered that only seven actually passed the inspection. Those included Upbit, Bithumb, Gopax, Korbit, Coinone, Hanbitco, and Huobi Korea. No further information was provided as to what was expected of these other agencies to meet the proper level of security.