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Bitcoin crashes when hackers hit South Korean exchange Coinrail

SEOUL (Reuters) – South Korean cryptocurrency exchange Coinrail said it was hacked over the weekend, causing a sharp drop in bitcoins amid renewed security concerns on virtual currency exchanges as global policymakers struggled to trade the digital asset to regulate.

FILE PHOTO: This illustration image, December 26, 2017, shows a small toy figure on representations of the virtual currency Bitcoin. REUTERS / Dado Ruvic / Illustration

In a statement on its website on Monday, Coinrail said its system was hit by a “cyber break-in” on Sunday, which resulted in a loss of about 30 percent of the coins traded on the exchange. The value has not been quantified, but in an undrawn report, local news agency Yonhap News estimated that approximately 40 billion won ($ 37.28 million) virtual coins were stolen.

The robbery at Coinrail, a relatively small South Korean cryptocurrency exchange, dropped Bitcoin prices to a two-month low as it again highlighted the security risks and weak regulation of global cryptocurrency markets.

South Korea is one of the world’s most important cryptocurrency trading centers and is home to one of the busiest virtual coin exchanges, Bithumb.

On the Luxembourgish Bitstamp, bitcoin BTC = BTSP was last traded at $ 6,790.88, down 10.8 percent from Friday after falling about 65 percent from its all-time high in mid-December 2017.

Investors and regulators were shaken earlier this year after Japan’s cryptocurrency exchange Coincheck was hacked in a high-profile theft of digital currency worth over half a billion dollars.

In 2014, Tokyo-based Mt. Gox, which once handled 80 percent of the world’s bitcoin trade, filed for bankruptcy after losing around half a billion dollars worth of bitcoins. Recently, last December, the South Korean cryptocurrency exchange Youbit was closed and filed for bankruptcy after being hacked twice.

WARNING

Global policymakers have warned investors to be cautious when trading the digital currency in the face of the lack of comprehensive regulatory oversight.

“Coinrail is not a member of the group that promotes self-regulation to increase safety. It’s a small player in the market and I can see how such small exchanges with lower security standards can be at greater risk, “said Kim Jin-Hwa, representative of the Korea Blockchain Industry Association.

In South Korea, 14 major local cryptocurrency exchanges took measures to better protect users this January, including restrictions on creating more than one account.

Coinrail said the rest of 70 percent of virtual coins are now safe in its “cold wallet” that operates on platforms that are not directly connected to the internet. It was not immediately clear whether the lost coins were being kept in the more insecure “hot wallet”.

The Korea Internet & Security Agency, which is currently conducting the investigation with the police, said only four of the country’s largest exchanges are subject to information security management system (ISMS) certification requirement.

The ISMS is a system that certifies the protection of personal data in companies with average daily visitors of over 1 million.

“Coinrail has not been certified with the ISMS as of June this year as it is not mandatory (for the organization),” the local regulator said in a statement.

Coinrail confirmed in its statement that the exchange is fully cooperating with a police investigation into the hacking and that trading has been suspended for the time being. The company was not immediately available for further comments.

Coinrail was the 98th largest cryptocurrency exchange trading more than 50 different virtual coins, according to Coinmarketcap.com

Reporting by Cynthia Kim; Additional coverage from Choonsik Yoo; Adaptation by Shri Navratnam

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