Korea Plans Bank-Level No-Fault Rules for Crypto Exchanges
The South Korean government plans to impose bank-level, no-fault compensation rules on cryptocurrency exchanges.
The move follows a recent breach at Upbit and longstanding gaps in the country’s digital-asset regulation.
The shift aims to place major exchanges under the same scrutiny applied to traditional financial institutions, The Korea Times reported.
The Financial Services Commission (FSC) is reviewing provisions that would require virtual-asset service providers to compensate users for losses caused by hacking or system failures, regardless of fault.
This standard currently applies only to banks and electronic payment firms under electronic financial transaction laws.
The move follows a 27 November incident in which hackers transferred more than 104 billion Solana-based coins from Upbit to external wallets in just 54 minutes.
The coins were worth about 44.5 billion won (US$30.1 million).
Regulators could not order compensation under existing rules, leaving the exchange largely untouched by penalties.
The FSC’s proposed framework would make exchanges liable for user losses and introduce stricter requirements for IT security infrastructure, systems, personnel, and penalties.
System disruptions across the sector have added pressure.
Financial Supervisory Service (FSS) data shows the five largest exchanges, Upbit, Bithumb, Coinone, Korbit and Gopax, recorded 20 system failures from 2023 through September 2024.
These incidents affected more than 900 users and caused losses totalling 5 billion won.
Upbit accounted for six incidents and over 600 affected users, with losses totalling 3 billion won.
Lawmakers are considering raising fines for hacking incidents to as much as 3% of an exchange’s annual revenue.
This would match the standard applied to financial institutions.
Regulators currently cap fines for crypto exchanges at 5 billion won.
The Upbit breach also drew scrutiny for delayed reporting.
Although Upbit detected the hack around 5 a.m. on 27 November, it notified the FSS only at 10:58 a.m.
Some ruling party lawmakers questioned whether the delay was intentional, occurring shortly after a planned merger between Dunamu and Naver Financial concluded at 10:50 a.m.
The FSS is investigating but is not expected to issue heavy sanctions.
Lee Chan-jin
FSS Governor Lee Chan-jin said.
Featured image credit: Edited by Fintech News Hong Kong, based on image by pravavkr and kuprevich via Freepik
The post Korea Plans Bank-Level No-Fault Rules for Crypto Exchanges appeared first on Fintech Hong Kong.
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