South Korea is moving to impose bank-level liability standards on crypto exchanges following a $30.1 million hack at Upbit last month, shifting toward treating major platforms with the same regulatory rigor as traditional financial institutions.
The push follows a Nov. 27 breach at Upbit that saw over 104 billion Solana-based tokens worth 44.5 billion won ($36M) transferred to external wallets in just 54 minutes.
Financial Supervisory Service data shows the five major exchanges, Upbit, Bithumb, Coinone, Korbit, and Gopax, recorded 20 system failures between 2023 and September this year, affecting over 900 users with combined losses of 5 billion won. Upbit alone accounted for six incidents, with more than 600 victims suffering 3 billion won in damages. Draft legislation is expected to mandate IT security infrastructure plans, upgraded system standards, and significantly stronger penalties.
The planned reforms come amid a pattern of platform instability across Korea’s crypto sector.
The shift would fundamentally reshape accountability in Korea’s crypto industry by making exchanges liable to compensate victims, as banks must respond to security breaches or system failures.
Lawmakers are considering revisions that would allow fines of up to 3 percent of annual revenue for hacking incidents, matching standards for traditional financial institutions and replacing the current 5 billion won cap.
Korea’s Financial Intelligence Unit is preparing sanctions against major exchanges following on-site inspections that examined compliance with Know Your Customer checks and suspicious transaction reporting. “We will crack down on crypto money laundering, expanding the Travel Rule to transactions under 1 million won,” Financial Services Commission Chairman Lee Eok-won said during a National Assembly briefing.
The regulatory tightening extends beyond security requirements into comprehensive anti-money laundering enforcement.
