South Korea’s DAXA, the Digital Asset Exchange Alliance, is working to increase compliance standards for local crypto exchanges, most of all over risks linked to API key abuse during algorithmic trading. Around a third of the country’s crypto flows are from automated operations, and authorities and exchanges alike are attempting to tighten safeguards.
South Korea’s DAXA Targets API Abuse
South Korea’s DAXA would like to mandate member exchanges to verify API keys if they think they were shared or used fraudulently. Upbit, Bithumb, Coinone, Korbit, and Gopax will have more aggressive checks on abnormal trading activities. The decision is in response to issues in the digital asset ecosystem of South Korea.
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Re-Authentication and IP Whitelisting Measures
After the policy change introduced by South Korea’s DAXA, exchanges are required to re-authenticate the users whose accounts have been marked during monitoring reviews. Also, the platforms will introduce IP whitelisting systems to only allow API access from approved addresses. These measures, first and foremost, aim at limiting the risks arising from stolen credentials while at the same time supporting the legitimate automated trading strategies of quantitative firms and liquidity providers, a balance South Korea’s DAXA views as critical for market integrity.
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Balancing Innovation With Market Integrity
The Financial Supervisory Service acknowledged that automated trading has a major impact on liquidity and price discovery in the Korean crypto markets. Then again, shared or leaked API keys present system-wide risks.
By strengthening the access controls, South Korea’s DAXA hopes to not only protect investors and ensure regulatory compliance but also promote blockchain innovation. The main concern is how to implement security measures that will encourage institutional participation but at the same time cause minimum inconvenience to the traders who comply with the regulations.
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