[Asia Economy Reporter Lee Jung-yoon] Cryptocurrency exchange Korbit has decided to disclose the quantity of coins entrusted by customers and wallet addresses for the first time in Korea, receiving positive evaluations from the industry. This move is expected to be effective in restoring trust amid growing investor anxiety caused by the global exchange FTX incident.
According to the industry on the 17th, Korbit announced that with this decision, the quantity of all listed cryptocurrencies such as Bitcoin and Ethereum can be checked daily through its homepage. Additionally, by disclosing wallet addresses, it will be possible to track the cryptocurrency transaction history of the exchange.
Until now, Korbit has conducted audits on the quantity of held cryptocurrencies through external auditors. However, when FTX faced a liquidity crisis leading to a bank run and actual withdrawals became difficult, distrust towards exchanges arose. Concerns spread in the market that cryptocurrencies entrusted for trading might not be withdrawn on time, as seen in the FTX case. There were also suspicions that holdings were only maintained during audit periods since the quantities were not disclosed daily.
However, transparent disclosure of holdings can alleviate investors' concerns about bank runs. An industry insider said, "(With this decision) the image of the coin industry can positively change," adding, "It may also influence transparent management at other exchanges and act as a self-purification mechanism."
Previously, during the Terra-Luna incident, Korbit designated Luna as an investment caution item and disclosed the amount of transaction fees generated afterward, donating it to the Korea Legal Aid Corporation.
A Korbit official said, "We are making proactive efforts to protect investors and ensure transparent management," adding, "By disclosing held cryptocurrencies, we believe it can play a sufficient role in preventing investors from leaving the coin market and improving the image." He continued, "There are concerns about hacking due to the disclosure of wallet addresses, but the address alone cannot be used to find the private key, which acts as a password," and added, "Therefore, unless there is an internal control issue, disclosing wallet addresses does not cause hacking damage."
Other exchanges are also struggling to restore investor trust, which plummeted after the FTX incident. Bithumb has been disclosing financial status, including customer asset details, through quarterly financial audit reports by accounting firms on its homepage and public announcements. A Bithumb official said, "We are considering various measures such as shortening the disclosure cycle or disclosing wallet addresses."
Coinone also stated, "We are reviewing ways to improve the investment environment and increase customer trust in the exchange." An Upbit official explained, "Even without legal regulations, since 2018, we have been proactively announcing quarterly audit reports on held digital assets and Korean won."
Meanwhile, financial authorities are making efforts to prevent risks by discussing the status of customer asset custody and management and anti-money laundering systems with the five major domestic exchanges. The Financial Intelligence Unit (FIU) under the Financial Services Commission requested the establishment of a system to check customer asset custody information in real time and to monitor the safety of transaction support for cryptocurrencies issued by virtual asset service providers.
In response, exchanges stated that in Korea, customer deposits are strictly segregated and managed by banks issuing real-name accounts under the Act on Reporting and Using Specified Financial Transaction Information (Special Financial Information Act), and periodic audits and external disclosures of customers' cryptocurrencies are conducted. They also noted that issuance of coins by virtual asset service providers is restricted, making incidents like FTX unlikely to occur domestically.
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