South Korea Enforces Bank-Level Accountability on Crypto Exchanges
South Korea Implements Bank-Level Accountability on Crypto Exchanges
South Korea is gearing up to introduce stringent regulations that impose bank-level accountability on cryptocurrency exchanges. This move follows a recent security breach at Upbit, emphasizing the need for heightened standards in the crypto sector.
The Financial Services Commission (FSC) is considering new regulations that would hold exchanges liable for customer losses due to hacks or system failures, irrespective of fault. The Korea Times reported on Sunday, referencing insights from officials and market analysts.
Currently, such no-fault compensation models are exclusive to banks and electronic payment firms, as outlined in Korea’s Electronic Financial Transactions Act.
The regulatory initiative is a response to a significant incident on November 27, involving Upbit, which saw over 104 billion Solana-based tokens, valued at approximately 44.5 billion won ($30.1 million), transferred to external wallets within an hour.
Heightened Oversight for Crypto Platforms
The regulatory scrutiny also targets the recurring outages experienced by major exchanges. Data presented to lawmakers by the Financial Supervisory Service (FSS) revealed 20 system failures across major exchanges like Upbit, Bithumb, Coinone, Korbit, and Gopax since 2023, affecting over 900 users and resulting in losses exceeding 5 billion won.
Legislative changes are anticipated to enforce stricter IT security protocols, elevated operational standards, and severe penalties. Lawmakers are contemplating fines of up to 3% of annual revenue for hacking incidents, aligning with penalties for banks. Currently, crypto exchanges face a maximum fine of $3.4 million.
The Upbit breach has also sparked political inquiry due to delayed reporting, with allegations of intentional delay following a merger with Naver Financial.
Legislative Push for Stablecoin Regulations
Separately, South Korean lawmakers are urging financial regulators to finalize a draft stablecoin bill by December 10, threatening to proceed without government input if the deadline is missed. This follows slow progress and repeated delays, with hopes to present the bill during the National Assembly’s session in January 2026.
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