Korea’s FSS Seeks to Protect Investors from Crypto Exploit Losses
Lee Bokhyun, Governor of the Korean Financial Supervisory Service, said the agency will seek to protect investors from losses resulting from cryptocurrency exchange exploits, according to Korean newspaper Donga Ilbo.
Efforts to enact legislation
While delivering a congratulatory speech at a forum co-hosted by Donga Ilbo and its subsidiary broadcasting company Channel A on Wednesday, Lee underlined that the agency will be committed to enacting legislation that obligates crypto exchanges to be held accountable for customer asset losses caused by hacks.
He explained that amidst a continued crypto winter triggered by multiple failures, such as the collapse of the stablecoin Terra last year, cases of security vulnerabilities are subsequently occurring.
Cold wallet requirements
In response to this situation, financial authorities and the National Assembly are collaborating on legislation that would require crypto exchanges to store a portion of their custody assets in cold wallets, which are disconnected from the Internet, or face liability for damages resulting from hacks.
A February report from blockchain data platform Chainalysis showed that losses to crypto hacks last year amounted to $3.8 billion. Earlier this month, Korean crypto exchange GDAC suffered an exploit of 20 billion KRW (~$15 million).
Lee said the agency will work with the financial industry to bolster the fraud detection system and build an immediate response system that prevents uncanny transactions when abnormalities are detected. These efforts are to curb the rise in financial crimes, which followed the growing popularity of remote banking services.
Experts’ inputs
At the event held to discuss the protection of consumer information in the digital age, senior researcher Kim Gap-rae at Korea Capital Market Institute said that a law should be introduced to penalize unfair practices, such as market manipulation and use of undisclosed information, in the virtual asset market.
Lee Joo-hwan, head of the information security management division at Hana Bank, suggested the approach used in the US, which is recovering ill-gotten gains from financial crimes to compensate victims.
Kang Byung-hoon, a professor who teaches cyber security at KAIST, anticipated that the financial industry would accelerate the adoption of confidential computing, a highly secure system, to which even administrators have limited access.
