East Asia

South Korea's financial regulator says it will let exchanges halt deposits and withdrawals when a hack is suspected

What happened. South Korea's Financial Services Commission (FSC) held a security meeting for the crypto industry on 12 November, chaired by Vice Chairman Shin Jin-chang, and said it will issue a no-action letter so exchanges can block deposits and withdrawals pre-emptively when they suspect a hack, under certain conditions, Digital Asset, CoinPost and Unchained reported; Cointelegraph also reported the no-action letter. The current Virtual Asset User Protection Act allows a block only once a hack has clearly occurred, the outlets reported. An emergency guideline from the meeting asks exchanges to monitor around the clock; one that cannot should process deposits and withdrawals only in the hours its monitoring works and tell users in advance, Digital Asset and Unchained reported.

Why it matters. Exchanges had said the law leaves it unclear whether they may freeze funds before a hack is confirmed, CoinPost and Unchained reported, and the FSC pointed to the Binance hack as a case showing that blocking fast is decisive in limiting harm to users, Unchained reported. Shin said some businesses' awareness of security has stayed where it was before the industry was regulated, Digital Asset and CoinPost reported.

• Rules require exchanges to keep 80% of users' crypto in cold (offline) wallets and the share across all operators is 95% or more, the FSC said; it asked them to keep hot-wallet holdings to the minimum needed for trading and to hold enough insurance and reserves, Digital Asset and Unchained reported.
• The planned Digital Asset Act would give crypto businesses the security standards and liability for damages of financial companies; until then the FSC plans a guideline asking for comparable security duties, Digital Asset reported.
• Only five of the country's 28 crypto businesses, all won-market exchanges, belong to the Financial Security Institute, CoinPost and Unchained reported, and the FSC will push more to join, CoinPost, Unchained and Digital Asset reported; the institute will revise its exchange security inspection standards within the year, Digital Asset reported (CoinPost attributes the revision to the FSC).
• On 6 November the exchange GOPAX halted trading and deposits and limited withdrawals after a hacking threat email, saying no attack had taken place, CoinPost and Cointelegraph reported; its operator Streami attended the 12 November meeting, Unchained reported.
• On 24 October the platform Prabang suspended services after detecting abnormal hot-wallet withdrawals and reported losses of about $70,000, Cointelegraph reported.

Read the originals (5), usually in their own language:

• FSC: "Crypto exchanges should maximise the share kept in cold wallets" · Digital Asset, headline translated by us
• Korea's FSC to allow crypto exchanges to halt deposits and withdrawals on suspected hacking · CoinPost, headline translated by us
• South Korean Regulator Will Shield Exchanges That Freeze Funds at the First Sign of a Hack · Unchained
• South Korea to permit crypto withdrawal freezes during hacking threats · Cointelegraph
• South Korea will allow crypto exchanges to suspend deposits and withdrawals when a hack is suspected · PANews, headline translated by us