S Korean Exchanges ‘Could Downsize’ as Gov’t Regulations Bite

South Korean cryptocurrency exchanges could be forced to downsize or start looking abroad for business expansion opportunities as government regulations take their toll on the country’s crypto businesses and investors, per industry sources.

According to media outlet Money Today, a number of South Korean cryptocurrency holders are transferring their funds to overseas exchanges to avoid having to deal with South Korean banks, most of which now follow government guidelines that require Korean won withdrawals to be made through real-name, social security number-verified bank accounts.
The guidelines require that all exchanges agree six-month contracts with a South Korean bank for customer real-name deposits and withdrawals, the terms of which are subject to change upon each renewal. Banks are required to monitor these accounts for potentially suspicious activates and report their findings to the government.

As trading continues to decline in the country, banks that had invested in cryptocurrency exchange-related infrastructure are thus finding themselves “spending more on risk management” as a result of the government’s regulations – and finding dealing with exchanges a lot less profitable than they had initially expected.

The media outlet quotes an anonymous employee at a South Korean cryptocurrency exchange as saying, “Exchange profits are down 90% on what they were when the market was at its peak [in December 2017-January 2018]. The exchange industry as a whole invested a huge amount of money in technology, management and security systems in anticipation of market growth, but instead, many are now losing money and may eventually have to look to reducing the size of their workforces.”

Market leader Bithumb recently sold a controlling share in the company to a Singapore-based enterprise, plans to launch operations in Hong Kong before the month’s end and also intends to expand its activities to Singapore and Europe in the near future. Its closest rivals are also looking to expand overseas, with Upbit set to open a Singapore branch and Coinone opening an exchange in Indonesia in August this year.

However, the same media outlet also quotes a bank official as stating that South Korean exchanges’ overseas expansion plans “would do nothing” to improve the lot of domestic customers, and thus would do little to help exchanges’ causes when it came to striking deals with banks – as required by the government’s banking guidelines.

Kim Hyung-joong, a professor at Korea University, told Money Today, “Investors are becoming increasingly anxious […] The government should consider the possibility of fostering the cryptocurrency sector by introducing new [and beneficial] crypto-specific legislation.”

Author: Tim Alper
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FBI, S Korean Police Bust International XRP Phishing Scam

Police in Seoul have arrested at least two people on suspicion of cryptocurrency-related fraud after a joint investigation with the American FBI.

The agencies say they unearthed a phishing scam that appears to have robbed South Korean and Japanese cryptocurrency investors of USD 800,000 worth of Ripple (XRP).
Per TV news station MBC, at least one of the two men arrested is described as an office worker. The man allegedly mastermind an email-powered sting that drew in 24 South Koreans and 37 Japanese investors.

Prosecutors said the man hired a 42-year-old programmer to create a fake Ripple exchange website. The mastermind then sent emails to Ripple users in South Korea and Japan, claiming their funds had been frozen. The email redirected Ripple users to the fraudulent site, where he was able to convince them to enter their IDs and passwords, which he then used to access their accounts. It is thought that the FBI became involved because the phishing site targeted users of Ripple, an American cryptocurrency.

The man is said to have transferred funds into Korean won via legitimate exchanges, and used the money to pay for accommodation in a luxury apartment complex and fund an extravagant lifestyle.

Per Joongang Ilbo, the suspect claims that he has spent all of the money and cryptocurrency holdings, and has nothing left over. The prosecution service said it would be hard for the victims to receive any compensation for their losses – largely because cryptocurrencies are not deemed to have any monetary value under South Korean law.
The men have been indicted on charges of cyber fraud and violations of the Information and Communications Networks Act.

Many of Japan’s major, government-licensed cryptocurrency exchange platforms are providing “insufficient” protection against phishing schemes, potentially allowing cybercriminals to compromise their users, according to a report published by the University of Tsukuba and investment management firm Nomura Asset Management in May.
While phishing emails are probably the most common attempt to steal user credentials, fake exchange websites have become another popular tool for hackers to gain access to cryptocurrency investors’ funds.

When typing the name of an exchange into Google, you will regularly see exchanges listed on the top of the search results as ads. What is not always clear, however, is that some of these ads have been taken out by hackers and will lead you to a website that looks almost the same of the original exchange website but has the sole purpose of stealing your login credentials to then steal your funds on the actual exchange.

Fake exchange websites have popped up for a long list of exchanges including Bittrex, Poloniex, and Binance, among others.

Author: Tim Alper
Image Credit: iStock/South_agency

S Korean Exchanges: Gov Wants To “Cut Off Its Nose”

Three of South Korea’s biggest cryptocurrency exchange associations – the Korea Blockchain Association, the Korea Blockchain Industry Promotion Association and the Korea Blockchain Startup Association – have hit back at a government proposal to stop granting exchanges the same sort of tax breaks afforded to other small- and medium-sized businesses.
The three associations say the government’s decision shows a lack of medium-term planning, and, per the Hankook Ilbo, have accused Seoul of “cutting off its nose to spite its face.”

The associations said, “Exchanges and cryptocurrency brokerage businesses are being put in the same category as entertainment venues. If this legislation passes, many blockchain technology-related companies will find it harder to invest in research and development. Some companies may well move abroad.”

The group criticized the government for going back on its pledge to support Industry 4.0-related companies and the fintech sector.


The Hankook Ilbo quotes an unnamed employee at a South Korean exchange as saying, “We are very sorry to hear that the government is taking this decision at a time when cryptocurrency and blockchain technology is starting to gain worldwide recognition.”
As reported in February, some 30 of the country’s cryptocurrency exchanges generated a combined USD 648 million in taxable revenue in 2017.

As previously reported on Cryptonews.com, Kim Dong-yeon, the South Korean finance minister and the country’s Deputy Prime Minister, wants to change the way exchanges pay income tax and corporate tax – doing away with tax breaks of between 50% and 100% in the case of newer companies, and tax discounts of up to 30% in the case of older businesses.

The government says exchanges are not generating enough “value” to justify tax breaks, and will move to stop exchanges being classified as “venture companies.” Other businesses excluded from venture company status include pubs, karaoke venues and dance clubs.

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Author: Tim Alper
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