In April last year, the FTC issued a list of recommendations for the major South Korean exchanges, which requested them to include more liability clauses in their terms and conditions. Following these recommendations, the five exchanges will now be liable for any customer losses caused by fraudulent events.
The critical distinction here is that the platforms will be liable for customer losses, even if they were not knowingly involved in fraudulent actions. Before the FTC recommendation, exchanges were only required to reimburse users if it was proven that their systems were at fault for the losses.
The need for heightened liability comes amidst increased concern of cybercrimes initiated by South Kore’s neighbour – North Korea. In December 2017, Youbit witnessed about seventeen per cent (17%) of its assets stolen through a North Korean cyber attack. This attack eventually led to the bankruptcy of the exchange.
Most recently, another South Korean exchange, called UpBit, fell victim to a phishing scam initiated by North Korea. Just last month, users of the exchange started receiving emails, which contained a file with malicious code in it. While there were no direct losses associated with the hack, some of the UpBit customers did download the malware file.
The cryptocurrency trading sector in South Korea was profoundly affected by the bearish trends most major tokens witnessed at the end of 2018. Several exchanges did not make it through the winter. This new regulatory recommendation from the FTC aims to increase the trust customers have in crypto exchanges. However, the reformed terms and conditions will put increased pressure on the platforms.