South Korea is preparing to implement bank-level strict liability rules for cryptocurrency exchanges, following a recent hack of Upbit, and is requiring exchanges to adhere to the same standards as traditional financial institutions.
The Korea Times reported on Sunday that the Financial Services Commission (FSC) is reviewing new regulations that will require exchanges to compensate customers for losses incurred due to hacking or system failures, even if the platform itself is not at fault. The report cited views from officials and local market analysts.
Currently, under South Korea's Electronic Financial Transactions Act, the strict liability compensation model only applies to banks and electronic payment companies.
This regulatory push comes after the incident involving Upbit, operated by Dunamu, on November 27, when over 10.4 billion Solana-based tokens (worth approximately 44.5 billion won, or about 30.1 million USD) were transferred to external wallets in less than an hour.
Regulators are also responding to the recurring patterns of system failures. Data submitted by the Financial Supervisory Service (FSS) to lawmakers shows that South Korea's five major exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—reported 20 system failures since 2023, affecting over 900 users and resulting in total losses exceeding 5 billion won. Upbit alone recorded six failures, impacting 600 customers.
The upcoming legislative amendments are expected to impose stricter IT security requirements, higher operational standards, and harsher penalties. Lawmakers are considering a provision that would allow fines of up to 3% of annual revenue for hacking incidents, which aligns with the standards used by banks. Currently, the maximum fine faced by cryptocurrency exchanges is 3.4 million USD.
The Upbit hacking incident has also prompted scrutiny from politicians regarding the delay in reporting. Experts pointed out that while the hack was detected shortly after 5 AM, the exchange did not notify the FSS until nearly 11 AM. Some lawmakers believe this delay was intentional, occurring just minutes after Dunamu completed its merger with Naver Financial.
As reported by Cointelegraph, South Korean lawmakers are also urging financial regulators to submit a draft stablecoin bill by December 10, warning that if the deadline is missed, they will push forward without government involvement.
The ruling party's ultimatum was issued after slow progress and repeated delays, with officials hoping to submit the bill for discussion during the National Assembly's special session in January 2026.
Related: French banking giant BPCE to launch in-app cryptocurrency trading service
Original: “Reports say South Korea will impose bank-level liability on cryptocurrency exchanges”
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