Earlier in the year, the exchange was operating under the name Yapizone until hackers pilfered 5.5 billion won in April, causing the operator to switch its name to Youbit and carry on business operations as before. (Image: Yonhap)
SEOUL, Dec. 21 (Korea Bizwire) – In the aftermath of the cyptocurrency exchange Youbit declaring bankruptcy, the lack of oversight and serious risks investors take in pursuit of profits are increasingly becoming the focus of conversation.
Industry watchers said on December 20 that there are currently 20 cryptocurrency exchanges in operation, with 10 preparing to open up shop.
The first exchange in South Korea, Korbit, opened in 2013 and was followed by Bithumb and Coinone. These three constituted the cryptocurrency industry until this year, when Bitcoin fever intensified, leading to exchanges popping up left and right.
In the current cryptocurrency heyday, even industry experts are having difficulty keeping track of the emergence of new sellers.
The reason why so many are starting up their own exchanges is simply a matter of supply rising to meet explosive demand, with potential rewards highly lucrative.
Most transactions carry a 0.15 percent fee. At Bithumb, South Korea’s largest exchange, 5 trillion won changes (digital) hands a day, resulting in 7.5 billion won in earnings.
Of course, what holds true for the market leader does not mean the same for smaller-scale competitors, but even a fraction of Bithumb’s daily earnings is certainly nothing to sniff at.
The minimal barriers to entry, without the typical qualifications, certifications, government approval, etc, have been a double-edged sword, enabling both the growth of more businesses and higher risks posed by unqualified individuals.
In the aftermath of the cyptocurrency exchange Youbit declaring bankruptcy, the lack of oversight and serious risks investors take in pursuit of profits are increasingly becoming the focus of conversation. (Image: Yonhap)
The need for some underlying rules governing the industry has been recognized by the Korea Society of Blockchain, which released a set of guidelines, among them that an exchange operator must hold at minimum 2 billion won in capital, and must employ information security systems and personnel in accordance with the requirements demanded of financial services firms.
However, since the association has no way to enforce these rules, exchanges can choose to ignore them without fear of repercussions.
With financial regulators choosing to stand on the sidelines, the modus operandi for both buyer and seller is self-regulation.
Come next year, such an arrangement may prove to be untenable, as fears of North Korea-sanctioned hacking attempts are projected to increase. Just this year, Bithumb was hacked by suspected North Korean hackers, who caused the leak of 36,000 users’ personal information.
Those pointing out the general lack of standards raise the example of the now defunct Youbit. Earlier in the year, the exchange was operating under the name Yapizon until hackers pilfered 5.5 billion won in April, causing the operator to switch its name to Youbit and carry on business operations as before.
Lina Jang (linajang@koreabizwire.com)
