Five cryptocurrency exchanges in South Korea have formally revised their terms of service to make them liable for issues caused by potential cyberattacks or system malfunctions that may affect users, regardless of whether operators were willfully or grossly negligent.
As reported by The Korea Herald, Bithumb and four other crypto exchanges made the changes after receiving corrective recommendations from the Fair Trade Commission (FTC) in April 2018. They were also encouraged by the Korea Blockchain Association to establish a better system for addressing security breaches.
In their previous terms of service, the exchanges explicitly stated that they would not be held liable for losses suffered by investors in the absence of willful or gross negligence. Bithumb alone lost 35 billion won (US$31.5 million) worth of cryptocurrencies in a cyberattack in June 2018.
Given that crypto exchanges prefer to maintain a reserve of digital assets equivalent to the amount stored in a hot wallet, major exchanges are typically able to cover breaches costing of tens of millions of dollars using corporate funds. Nevertheless, a guarantee that investors are safeguarded against potential cyberattacks would facilitate a more secure environment for investors.
Jeon Ha-jin, chairman of South Korea Blockchain Association, noted that various crypto-related organizations and firms started working to establish a system in response to cyberattacks because exchanges will continue to be targeted in the long-term.
CCN Markets expects public perception of the crypto exchange market to improve with the development of insurance, a practical regulatory framework and a guarantee for investors regarding the safety of their funds.
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