South Korea's Bithumb loses $32 million in digital money heist, bitcoin falls

SEOUL (Reuters) - South Korean cryptocurrency exchange Bithumb said 35 billion won ($ 31.5 million) worth of virtual coins were stolen by hackers, the second local exchange targeted in just over a week as cyber thieves exposed the high risks of trading the digital asset.

FILE PHOTO: The logo of Bithumb is seen at its cryptocurrencies exchange in Seoul, South Korea, January 11, 2018. REUTERS/Kim Hong-Ji/File Photo

Bithumb said in a notice on its website on Wednesday that it had stopped all trading after ascertaining “some cryptocurrencies worth about 35 billion won were seized between late yesterday and early morning today.”

The exchange, the sixth busiest in the world according to Coinmarketcap.com, said it had stored “all clients’ assets in safe cold wallets,” which operate on platforms not directly connected to the internet.

It added that the company would fully compensate customers.

The Bithumb theft highlights the security risks and the weak regulation of global cryptocurrency markets. Global policymakers have warned investors to be cautious in trading the digital currency given the lack of broad regulatory oversight.

In Ho, a professor at Korea University’s Blockchain Research Institute, said the stolen coins were most likely to be from the more insecure ‘hot wallets.’

“Since coins in the cold wallets are not at all wired to the internet, it would have been impossible for hackers to steal those in cold wallets unless they physically broke in,” said In, a blockchain expert at the research center.

Bithumb did not immediately respond to Reuters’ request for comments, and its statement did not say whether the stolen coins were stored in its ‘hot wallets’.

Mun Chong-hyun, chief analyst at ESTsecurity, said digital coins would continue to be juicy targets for hackers around the world.

“No security measures or regulations can 100 percent guarantee safety of virtual coins. It is held anonymously and in lightly-secured systems, which makes them an irresistible target,” Mun said.

On the Luxembourg-based Bitstamp, bitcoin BTC=BTSP was down 1.8 percent at $ 6,612.92 by 0351 GMT, extending losses as a series of intrusions on cryptocurrency exchanges in recent weeks sparked concerns over security.

It has fallen roughly 70 percent from its all-time peak hit around mid-December 2017.

On June 11, another South Korean cryptocurrency exchange Coinrail said it was hacked. The cyber attacks come after a high-profile theft of over half a billion dollars worth of digital currency at Japan’s exchange Coincheck earlier this year.

In January, South Korea banned the use of anonymous bank accounts for virtual coin trading to stop cryptocurrencies being used in money laundering and other crimes. But the government said it does not intend to go as far as shutting down domestic exchanges.

Bithumb trades more than 37 different virtual coins, according to Coinmarketcap.com

Editing by Shri Navaratnam and Jacqueline Wong

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U.S. Supreme Court weighs South Dakota e-commerce sale tax fight

WASHINGTON (Reuters) - The U.S. Supreme Court on Tuesday will consider whether to let states force out-of-state online retailers to collect sales taxes on purchases in a fight potentially worth billions of dollars pitting South Dakota against e-commerce businesses.

FILE PHOTO: The South Dakota state capitol building is seen in Pierre, South Dakota, U.S., February 7, 2018. REUTERS/Lawrence Hurley/File Photo

South Dakota is asking the nine justices to overturn a 1992 Supreme Court precedent that states cannot require retailers to collect state sales taxes unless the businesses have a “physical presence” in the state.

The state, appealing a lower court decision that favored Wayfair Inc, Overstock.com Inc and Newegg Inc, is being supported by President Donald Trump’s administration.

A ruling favoring South Dakota could eventually lead to online customers paying more for many purchases.

Such a ruling could help small brick-and-mortar retailers compete with online rivals while delivering up to $ 18 billion into the coffers of the affected states, according to a 2017 federal report. The justices are due to decide the case by the end of June.

South Dakota depends more than most states on sales taxes because it is one of nine that do not have a state income tax. South Dakota projects its revenue losses because of online sales that do not collect state taxes at around $ 50 million annually, while its opponents in the case estimate it as less than half that figure.

FILE PHOTO: A view of the U.S. Supreme Court building is seen in Washington, DC, U.S., October 13, 2015. REUTERS/Jonathan Ernst/File Photo

The justices will hear the case against a backdrop of Trump’s harsh criticism of Amazon.com Inc, the dominant player in online retail, on the issue of taxes and other matters. Trump has assailed Amazon CEO Jeff Bezos, who owns the Washington Post, a newspaper that the Republican president also has disparaged.

Amazon, which is not involved in the Supreme Court case, collects sales taxes on direct purchases on its site but does not collect taxes for items sold on its platform by third-party venders, amounting to about half of total sales.

South Dakota is supported by industry groups representing major retailers that have brick-and-mortar stores, and therefore already collect state sales taxes. The National Retail Federation, which supports the state, has a membership that includes Walmart Inc and Target Corp, as well as Amazon.

E-commerce companies supporting Wayfair, Overstock and Newegg include two that provide online platforms for individuals to sell online: eBay Inc and Etsy Inc.

The 2016 South Dakota law requires out-of-state online retailers to collect sales tax if they clear $ 100,000 in sales or 200 separate transactions. The state sued a group of online retailers to force them to collect the state sales taxes, with the aim of overturning the 1992 precedent.

Reporting by Lawrence Hurley; Editing by Will Dunham

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South Korea regulator flags better deal for cryptocurrency industry

SEOUL (Reuters) - A better deal for South Korea’s cryptocurrency industry might be in the offing as the market regulator changes tack from its tough stance on the virtual coin trade, promising instead to help promote blockchain technology.

The regulator said on Tuesday that it hopes to see South Korea - which has become a hub for cryptocurrency trade - normalize the virtual coin business in a self-regulatory environment.

“The whole world is now framing the outline (for cryptocurrency) and therefore (the government) should rather work more on normalization than increasing regulation,” said Choe Heung-sik, chief of South Korea’s Finance Supervisory Service (FSS), told reporters.

The latest news suggests authorities might adopt a lighter regulatory touch, a step change from the justice minister’s warnings in January that the government was considering shutting down local cryptocurrency exchanges, throwing the market into turmoil.

FSS has been leading the government’s regulation of cryptocurrency trading as part of a task force.

Cryptocurrency operators see Choe’s comments as positive step for the industry’s plans for self-regulation.

“Though the government and the industry have not yet reached a full agreement, the fact that the regulator himself made clear the government’s stance on co-operation is a positive sign for the markets,” said Kim Haw-joon of the Korea Blockchain Association.

South Korea banned the use of anonymous bank accounts for virtual coin trading as of January 30 to stop cryptocurrencies being used in money laundering and other crimes.

Three local banks including Shinhan Bank, Industrial Bank of Korea, NH Bank, are currently offering cryptocurrency accounts to around five local virtual coin exchanges.

Choe said that Kookmin Bank and KEB Hana Bank may have also put in place an appropriate system, though they haven’t as yet started handling transactions.

“I hope they (the banks) no longer fear authorities once they have the right system,” Choe added.

An official from FSS told Reuters tough regulatory oversight of illegal trade in cryptocurrencies will remain in place.

Bitcoin BTC=BTSP, the world"s most heavily traded cryptocurrency, is now changing hands at a three-week high of $ 11,160 on the Luxembourg-based Biststamp exchange after falling as low as $ 5,920.72 in early February.

South Korean electronics giant Samsung has already started production of cryptocurrency mining technologies, local media reported in January.

Reporting by Dahee Kim; Editing by Eric Meijer & Shri Navaratnam

Our Standards:The Thomson Reuters Trust Principles.

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South Korea says uncovered about $600 million in cryptocurrency crimes

SEOUL (Reuters) - South Korea has uncovered illegal cryptocurrency foreign exchange trading worth nearly $ 600 million, a sign authorities are tightening the regulatory screws on the digital asset that many global policymakers consider to be opaque and risky.

The country’s customs service said in a statement on Wednesday that about 637.5 billion won ($ 596.02 million) worth of foreign exchange crimes were detected.

“Customs service have been closely looking at illegal foreign exchange trading using cryptocurrency as part of the government’s task force,” it said, underscoring stepped-up efforts by Seoul to crack down on illegal trade in the digital asset.

Illegal foreign currency trading of 472.3 billion formed the bulk of the cryptocurrency crimes, Customs said, but gave no details on what action authorities were taking against the rule breaches.

South Korea has adopted a tough stance on regulating cryptocurrency trading as many locals, including students and housewives, jumped into a frenzied market despite warnings from policy makers around the world of a bubble.

Effective from Jan. 30, authorities will allow only real-name bank accounts to be used for cryptocurrency trading designed to stop virtual coins from being used for money laundering and other crimes.

Among other breaches, Customs said there were also cases where investors in Japan sent their yen worth 53.7 billion won to their partners in South Korea for illegal currency trade.

It said authorities will continue to monitor for any violations of foreign exchange rules or of money laundering activities.

Seoul previously said that it is considering shutting down local cryptocurrency exchanges, which threw the market into turmoil and hammered bitcoin prices. Officials later clarified that an outright ban is only one of the steps being considered, and a final decision was yet to be made.

Bitcoin stood at $ 9,800.00 as of 0502 GMT on the Luxembourg-based Bitstamp exchange. The heightened regulatory scrutiny around the world, however, has seen bitcoin dive about 31 percent so far this month, on track for its biggest monthly decline since December 2013.

Cryptocurrencies got another jolt last week after Tokyo-based exchange Coincheck said hackers stole over $ 500 million in one of the world’s biggest cyber heists.

($ 1 = 1,069.6000 won)

Reporting by Dahee Kim and Cynthia Kim; Editing by Sam Holmes & Shri Navaratnam

Our Standards:The Thomson Reuters Trust Principles.

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South Korea to impose new curbs on cryptocurrency trading

SEOUL (Reuters) - South Korea’s government said on Thursday it will impose additional measures to regulate speculation in cryptocurrency trading within the country.

“The government had warned several times that virtual coins cannot play a role as actual currency and could result in high losses due to excessive volatility,” the government said in a statement.

It noted that trading prices of most virtual currencies were much higher on South Korean exchanges than they were on exchanges in other countries, although it did not provide specific examples.

The steps will include a ban on opening anonymous cryptocurrency accounts and new legislation to allow regulators to close virtual coin exchanges if needed, a measure recommended by the justice ministry, the statement said.

South Korea had previously announced its plan to tax capital gains from cryptocurrency trading to tackle what it sees as the risk of excessive speculation.

Bitcoin, the world’s biggest and best-known cryptocurrency, has gained more than 19-fold this year.

In South Korea, bitcoin has been extremely popular, drawing wide participation from housewives and students. As of 0304 GMT, it stood at $ 14,384 on the Luxembourg-based Bitstamp exchange.

Reporting by Dahee Kim; Editing by Shri Navaratnam and Sam Holmes

Our Standards:The Thomson Reuters Trust Principles.

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