Korea's antitrust watchdog probes crypto exchanges for unfair clauses

[Photo by Lee Chung-woo]

South Korea’s antitrust watchdog has begun looking into 10 or more cryptocurrency exchanges in search for any clauses that unfairly exempt from liability in investors losses.

The Korea Fair Trade Commission (FTC) initiated its on-spot inspection in late April on multiple digital coin exchanges including four major players Bithumb, Upbit, CoinOne and Korbit to examine whether they have too broad exclusion clauses that minimize their legal responsibility for consumer damages.

The probe came amid mounting complaints from digital currency traders who claim server shutdowns and system failures have caused them losses. Digital coin exchanges are experiencing frequent system errors due to the overheated traffic from frantic trading volumes.

The regulator already looked into the terms of use of a dozen of local cryptocurrency exchanges in December 2017 and found five of them, Bithumb, Korbit, Coinplug, Incublock and Wavestring, had 12 unfair clauses. Based on the findings, the five crypto exchanges were ordered to voluntarily correct the unfair terms in April 2018. During the latest inspection, the FTC studied their remedial progress.

Upbit said Thursday that it has made 3.1 billion won ($2.74 million) worth compensation for investors damaged by its system malfunctions over the past four years.

The exchange said it has so far paid 3.1 billion won in compensation for 2,397 damage claims. For this year, it has received 1,207 complaints and paid 1.7 billion won to compensate 80 percent or 966 of them including one related to the trading errors caused by soaring Dogecoin transactions. Dogecoin was listed on the exchange in February.

Upbit said it has expanded server capacity and maintained close monitoring on the system on the back of the recent surge in trading volume. If any service failure occurs, it would make compensation for related damages even when there is no evidence that the company is responsible for the erros.

Upbit has an investor protection protocol that reviews damage claims it receives within seven days after a server shutdown for 60 days and informs damaged investors of the result of the examination. “Upbit has a damage compensation principle in place and actively made compensations for investor losses,” the company said. “We will continue to work hard to prevent any system errors and create reliable investment environment.”

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