South Korea Fines Crypto Exchanges for Privacy Failures

The South Korea government has today issued fines totaling 141 million won ($130,000) to domestic cryptocurrency exchanges for providing insufficient user data protection.

In a public announcement, the Korea Communications Commission (KCC) said the penalty is a result of an investigation that the agency conducted from Oct. 10 to Dec. 28 in 2017 across 10 domestic crypto exchanges. Launched as a ministry-level agency, KCC is responsible for regulating the broadcasting and telecommunications sector, as well citizen's information protection.

Among the 10 surveyed companies, eight were found to be violating the Information and Communication Network Act, which mandates user privacy protection methods, according to the announcement.

The eight penalized companies are: Upbit, Ripple4y, Coinpia, Youbit, Korbit, Coinone and Coinplug, as well as Eyalabs, a cryptocurrency wallet service. According to the agency, the individual fines range from $9,000 to $14,000.

The announcement details that critical violations include some exchanges failing to delete users' data even when they had stopped using the service for over a year, and some others storing users' data outside of the country.

KCC chairman Lee Hyo-Sung said:

"While the security threats such as virtual currency speculation and hacking of handling sites are increasing, the actual situation of personal information protection of major virtual currency exchanges is very weak. Therefore, we will try to reduce the damage of users through more strict sanctions."

The KCC subsequently required these exchanges to take actions in resolving the issue within 30 days and file reports to the agency. In addition, the regulator said it will draw up and implement plans pertaining to managing cryptocurrency wallets, private keys and cryptocurrency transactions to serve as administrative guidance for exchanges.

While the amount of the individual fines may not be significant, the move arrives just a day after the country's financial watchdog set a date for the formal cessation of anonymous cryptocurrency trading, yet another signal of the effort underway by the country's authorities to increase regulation of cryptocurrency exchanges.

Editor's note: Some statements in this article have been translated from Korean.

Seoul image via Shutterstock