South Korea's Financial Services Commission plans to let crypto exchanges temporarily block deposits and withdrawals when they suspect a hacking attempt. The regulator also wants tighter monitoring and more offline storage after several recent security incidents.
South Korea plans to let cryptocurrency exchanges temporarily block deposits and withdrawals when they suspect a hacking attempt, so platforms can act before a breach is confirmed. The Financial Services Commission (FSC) said in a Thursday announcement that it would issue a no-action letter covering suspensions under certain conditions.
The decision followed a security meeting in Seoul chaired by FSC Vice Chairman Shin Jin-chang. The letter would not give exchanges unrestricted authority to freeze customer funds.
Existing law left a gap on suspected attacks
Under the Virtual Asset User Protection Act, exchanges cannot restrict customer deposits and withdrawals without legitimate grounds, and the law permits suspensions when a hacking incident is clearly established. That left uncertainty over whether an exchange could stop transactions before confirming an attack.
The FSC said rapid intervention can prevent further losses when an exchange faces a possible breach. The no-action letter would give operators regulatory assurance for preventive suspensions that meet the specified conditions.
Recent incidents prompted the move
The proposal follows several threats. On November 6, GOPAX suspended trading, deposits and standard withdrawals after receiving an email threatening a cyberattack, though it said it had not detected an actual hacking attempt or theft. On October 24, Prabang suspended operations after detecting abnormal withdrawals from its hot wallet and reported losses of approximately $70,000.
Tougher monitoring and storage expectations
The FSC called for continuous monitoring throughout the day. Platforms unable to maintain round-the-clock monitoring would have to process deposits and withdrawals only during hours when their security teams are available, and inform customers in advance.
South Korea currently requires providers to hold at least 80% of customer cryptocurrency in cold wallets. According to the FSC, the industry's overall ratio already exceeds 95%, although individual exchanges differ. Under the new guidance, exchanges should limit hot wallet balances to the amounts needed for routine transactions.
The Financial Security Institute will also update its security inspection standards by the end of 2026, covering transaction verification, wallet access controls, blockchain systems and smart contracts.
Source: crypto.news
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