The South Korean Fair Trade Commission (FTC), the country’s regulatory authority for economic competition, has ordered 12 local cryptocurrency exchanges to revise their adhesion contracts to provide better protection to consumers.
According to the FTC, existing guidelines unfairly bar users from withdrawing their deposits, or limit their services to users, and force users to shoulder all financial losses when they end their membership with the crypto exchange. The exchanges’ policy of converting users’ cryptocurrencies to cash if they haven’t logged in to their accounts in six months are also illegal and unfair.
Consumer protection in South Korea is regulated under the Act on Consumer Protection in Electronic Commerce (E-Commerce Act). Under the law, all compensation payments on losses have to be made with legal tender. Other means, such as cryptocurrency payments, are valid only when both parties agree.
The FTC said the exchanges’ one-sided compensation terms are not valid. The cryptocurrency is still the owner’s property, so exchanges have no right to convert it to cash. The regulator demanded that exchanges offer users the choice of compensation in cryptocurrency or fiat currency.
Other issues cited by the regulator include the distribution of advertisements to exchange customers, and the exchanges’ failure to accept any accountability for potential hacking attacks that could disrupt service or result in the exposure of sensitive customer information.
The FTC has given the 12 cryptocurrency exchanges 60 days to implement the changes. The companies will likely change their contract terms in June.
South Korea has been implementing a series of crypto regulations since January of this year, including ending anonymous crypto trading and banning government officials from holding and trading cryptocurrencies. Last month, the Ministry of Strategy and Finance announced it will release a taxation framework for cryptocurrencies by the end of June.
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