cryptonews.com
A report from a leading South Korean think-tank has concluded that crypto exchanges, banks and other institutions should be legally obliged to refund crypto investors in the event of the loss of private keys or bankruptcies.
According to Aju News and Sports Seoul, the recommendations came in a paper authored by Kim Dong-hwan, a senior research fellow at the Korea Institute of Finance.
The institute advises the financial sector and provides financial policy recommendations to the government and regulators, as well as self-regulatory bodies.
The report was entitled A Study on the Effectiveness of Virtual Asset Regulations, where Kim wrote:
“For virtual asset regulation to become an effective means of protecting investors, it is necessary to review not only the regulations pertaining to exchanges but also the legal aspects of virtual assets, such as the possibility of exercising the right to claim a refund.”
Kim continued that individual investors were currently “not protected” from cases whereby exchanges holding users’ private keys “lose or arbitrarily dispose of” keys or “go bankrupt” unless clients were guaranteed the right to claim refunds.
But he suggested that a system that ensured customers enjoyed the same kind of statutory rights to refunds as shoppers in stores or on major e-commerce platforms needed to be built for crypto buyers.
Although he did not specify whether exchanges alone, or their banking partners, should be held accountable, he theorized that “it would be theoretically possible” to exercise the right to claim a refund in certain cases, but admitted that such a right could “actually be exercised without the cooperation of the exchanges “holding clients’ private keys.”
He concluded that “the right to claim refunds” is “a necessary condition” for crypto trading that should not be absorbed by banking partners. Banks, in turn, would otherwise have to absorb expenses incurred by such claims when made through their exchange partners. Such claims risked or “passing on” expenses “to banks and their customers.”
Kim observed:
“Globally, [crypto] regulations aimed at protecting investors, preventing money laundering and funding terrorism have mainly focused on exchanges.”
From September 24, all South Korean exchange customers will need to operate using real name-authenticated accounts issued by partner banks.
Banks will be obliged to conduct their own assessments on exchanges before striking six-month contracts with trading platforms – and have been ordered to absorb all risks involved with such partnerships. Thus far, none of the nation’s 60 operational exchanges have successfully sealed such a deal – meaning that there is a distinct possibility that as of autumn, South Koreans will not be able to legally trade crypto.