South Korea’s Financial Services Commission (FSC) will let crypto exchanges freeze deposits and withdrawals when a hack is only suspected, not confirmed. Korean traders gain faster theft protection but lose certainty over when coins can leave an exchange.
The FSC also wants all 28 registered crypto businesses inside the Financial Security Institute (FSI), the sector’s state-run cyber auditor. Yet the FSI disclosed a breach of its own systems this week.
Why Does a Suspected Hack Now Justify a Freeze?
Korea’s crypto investor-protection law bars exchanges from blocking withdrawals without legitimate grounds. Until now, only an obvious hack clearly qualified.
Exchanges told regulators that halting withdrawals over suspicious activity sat in a legal gray zone. The FSC’s answer is a no-action letter, a written pledge not to penalize that practice.
Officials pointed to Binance as proof that speed decides losses. Attackers drained about $6.3 billion from the exchange in late October, a theft the FBI tied to North Korea .
Domestic pressure has also built. Bithumb disclosed a personal data leak from an internal mobile system in late October. GOPAX then halted trading and withdrawals on November 6 after a hacking threat .
Can a Hacked Watchdog Secure South Korea’s Crypto Exchanges?
Only five won-trading exchanges belong to the FSI so far. The FSC wants the other 23 to join or receive similar support, including vulnerability checks.
That push comes at an awkward moment. On Monday, the FSI confirmed hackers had broken into the online portal that financial firms use to submit security-audit paperwork.
The stolen files may include those firms’ own answers to FSI security assessments. The FSI said the portal sits outside its core network, and regulators are still checking what was taken.
The new guidelines also push exchanges to keep minimal balances in hot wallets and to raise insurance and reserves. Operators already hold over 95% of client assets offline, against an 80% legal floor.
Lasting rules depend on the proposed Digital Asset Act, which would impose bank-grade IT duties and damage liability on exchanges. Until it passes, Seoul is regulating by guideline, leaning on a security partner that is still investigating its own breach.
The post South Korea Just Changed When Exchanges Can Freeze Your Crypto appeared first on BeInCrypto .
