South Korea is easily one of the top five crypto destinations in the world. The crypto friendliness of this Asian powerhouse has cost the economy billions, with the rate of crypto theft and scams rising through the roof.
Earlier this week, the South Korea Justice Ministry revealed in a report an estimated loss of 2.69 trillion won (about $2.28 billion) to cryptocurrency-related crimes over the past two years.
The statistics cover a time period from July 2017 to June 2019 specifically. The Justice Department claims that during this period, it has indicted and detained no less than 132 crypto criminals and fraud scheme operators. Another 288 criminals were charged without physical detention, according to the Ministry.
No regulations, big problems
The report also showed the efforts of the Justice Department and Justice Minister Park Sang-Kim to enforce crypto criminal laws, as well as how a lack of clear regulations has impeded their efforts so far. For instance, it revealed that South Korea has seen an increasing number of opaque (or quasi-anonymous) accounts on cryptocurrency exchanges, which make user identification and tracking asset movement difficult.
In addition to that, several minor exchanges have resorted to using “beehive accounts” to circumvent a 2018 ban on the existence of anonymous crypto exchange platforms. The exchanges in question keep their users’ funds in their corporate bank accounts, so the identities of their users become private.
In a bid to bring an end to this the government tried to veto the practice, but a court stopped the maneuver dead in its tracks based on a ruling that it would be inappropriate to close the corporate bank accounts held by exchanges.
A potential problem for crypto exchanges
While the report didn’t particularly speak on the Justice Department’s plans to curb this growing crime phenomenon, it doesn’t seem to bode well for cryptocurrency exchanges. Apart from users themselves, these platforms (as well as pretty much every other asset custodian in the country) are the primary victims of crypto crimes, and an increase in the crime rate will only mean that their profits will be placed in more risk.
However, some exchanges seem to be ready to take on the challenge. Last month, the Korea Herald reported that five exchanges in the country had agreed to increase their liability to users.
The development came a year after an initial request was made by the Fair Trade Commission, and while the exchanges weren’t named, Bithumb was confirmed to be one of the agreeing parties.
According to the news outlet, the exchanges would bear the onus for paying out, regardless of whether they displayed any gross negligence or not.
The same approach could be taken for all exchanges looking to function in the state; the government could compel them to be more liable to their users in the case of fraud or crimes and hope that this increased exposure would cause them to sit up and play ball.
However, even a solution like this is indicative of the same fact; South Korea desperately needs some clear regulations with its crypto industry. With these, activities can be more regulated, and the crime wave would undoubtedly be halted.