South Korea to let crypto exchanges freeze withdrawals before a hack is confirmed

South Korea's Financial Services Commission said Thursday it will issue a no-action letter allowing crypto exchanges to suspend deposits and withdrawals when a hack is suspected, rather than waiting for confirmation that one happened. Under current rules, exchanges can't block withdrawals without legitimate grounds, and restrictions are explicitly permitted only once a hacking incident is clearly established.

The regulator paired the relief with demands: round-the-clock monitoring and incident response, bigger cold-wallet holdings, and stronger insurance coverage and reserves. Exchanges that can't watch their systems continuously would have to process deposits and withdrawals only during staffed hours, with advance notice to users.

The push follows two scares on South Korean platforms. GOPAX suspended trading, deposits and standard withdrawals on Friday after receiving a hacking threat, though a representative said no breach took place. On Oct. 24, trading platform Prabang halted services after spotting abnormal hot-wallet withdrawals and reported roughly $70,000 in losses.

The FSC's October review of 555 financial companies nationwide flagged cybersecurity deficiencies at 130 of them. Separately, the regulator named GOPAX operator Streami and Prabang among 16 companies tied to earlier security incidents.