Korean cryptocurrency industry’s most prominent self-regulatory body known as the Korean Blockchain Association (or KBA) faces doubts related to inspection standards and quality after an astonishing approval rate of 12 out of 14 cryptocurrency exchanges inspected. The inspections were carried out by Korean Blockchain Association’s most recent self-regulatory drive. The KBA has about 25 crypto exchanges as members. The organization recently concluded an in-house inspection of 12 local cryptocurrency exchange platforms. The inspection had begun in May of 2018.
According to a report published by the popular Korean news outlet Korea Herald, the Korean Blockchain Association performed the inspections by authorizing third-party service providers to conduct the proceedings. The news outlet emphasized on an essential shortcoming of the inspection that it didn’t include any sort of hacking simulation of the inspected exchanges especially when security is one of the biggest issues in crypto exchanges today. The report mentioned that during June and July, the inspection was only restricted to interview of the exchanges’ personnel.
Surprisingly, 12 of the 14 domestic crypto exchanges inspected were approved to have met the general standards of the crypto industry as mandated by the organization itself. Major points in these standards include the implementation of emergency cold wallets (also called offline wallets), implementation of anti-money laundering procedures and screening, and possessing a specific minimum in digital assets.
Despite the astonishing approval rate, in a recent press conference, the chairman of the KBA Jhun Hai-jin showed that the regulatory organization isn’t completely blind. Hai-jin said that the inspection did reveal security issues in some of the inspected exchanges and huge gaps in the handling of security issues were observed in some exchanges also.
But Hai-jin did stand with the report by saying that regardless of these issues, the approved crypto exchange platforms did meet the minimum acceptable standards designed by the KBA. When asked about the details of the cybersecurity risks mentioned, the chairman declined to reveal the information for the sake of avoiding the risk of leaving the exchanges vulnerable. It is one thing to have a security flaw in “any of the 12 exchanges” and revealing the details of the flaw is quite a risk. To explain the scenario Hai-jin used the driver license as an example. He said that anyone who passes a certain test can get a driver license, but it doesn’t mean that everyone who has a driver license is a good driver. Quite clever if you think about it.
The Korean Blockchain Association had also faced criticism over doubling the initial one-month inspection period back in May. The official reason given was to give time to prepare to crypto exchanges who did not meet the minimum requirements. It is also worth noting that the initial pool of to-be-inspected crypto exchanges contained 14 exchanges, however, two of them, Komid and Sunny7, withdrew from the inspection. Moreover, Bithumb, one of the approved exchanges, had very recently announced to have been hacked with $30 million in digital assets stolen.