User data glitch threatens to hurt South Korea’s new crypto regulations

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A South Korean regulator has warned of a wrinkle in the future governance of crypto exchanges – just days after its enactment. At worst, the problem could leave sensitive customer data compromised due to a legal issue.

As Previously reported, a key amendment to the existing law on the reporting and use of certain financial transaction information will come into effect on March 25, requiring exchanges to comply with anti-money laundering protocols and use platforms -Real-name banking forms verified by social security numbers.

This will require users – even existing customers – to submit their real names, proof of identity and social security details to the exchanges later this month. However, the amendment also requires exchanges to apply to regulation. Financial monitoring service (FSS) for operating permits. The FSS will review applications in a six-month process that will end in September.

But by a report by Kookmin Ilbo, another financial regulator, the Financial Intelligence Unit (CRF), which will monitor exchanges from March 25, is concerned about the fate of user data from exchanges that ultimately don’t get licenses. South Korean law requires companies to purge their databases and securely delete sensitive user data within six months of no longer needing to access it.

However, in the case of companies that close their doors or find themselves in limbo after their license applications have been rejected, the FIU is concerned that the data could be compromised or not taken into account.

The CRF therefore advised crypto exchanges not to request such user data from customers until their requests are approved or rejected. However, the same media point out that this advice is not legally binding and that many exchanges have already started asking their customers to send them sensitive data.

Unscrupulous players may also take advantage of the issue, masquerading as bona fide exchanges with the aim of collecting “hundreds of thousands of social security numbers,” noted the author of the report.

There are some 120 crypto exchanges currently operating in South Korea, although the head of one of the country’s largest trading platforms claimed earlier this year that only between Exchanges “four and seven” could be left on hold by September – although there has been a suggestion that a few others may also get the note if they are willing to use other crypto custody arrangements.
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