Summary

  • The Financial Services Commission said it will issue a no-action letter allowing crypto exchanges to preemptively block deposits and withdrawals even when a hack is only suspected.
  • The FSC said it will include in the Digital Asset Basic Act provisions requiring virtual asset service providers to meet financial-industry-level stability standards and assume liability for damages.
  • The FSC said it will push to maximize the share of assets held in cold wallets, expand insurance coverage limits and reserve funds, and broaden membership in the Financial Security Institute.

Forecast Trend Report by Period

FSC Unveils Crypto Security Measures

Pushes 23 Firms to Join Financial Security Institute

South Korean crypto exchanges will be allowed to preemptively block deposits and withdrawals when a hack is suspected. Under current law, virtual asset service providers can restrict deposits and withdrawals only when a hacking incident is clearly confirmed. The change will let them act as soon as signs emerge that users could suffer losses, helping prevent damage from spreading.

The Financial Services Commission said on Nov. 12 that it announced the measures at a virtual-asset industry security meeting chaired by Vice Chairman Shin Jin-chang. The FSC will issue a no-action letter allowing virtual asset service providers to immediately suspend deposits and withdrawals when hacking or other security breaches are suspected. Such a letter means the step would ordinarily be subject to sanctions under current rules, but regulators will temporarily permit it after taking the circumstances into account.

The FSC also plans to include provisions in the Digital Asset Basic Act, which will govern the broader virtual-asset ecosystem, requiring service providers to meet stability standards comparable to those for financial companies and assume liability for damages. It has also prepared emergency-response guidelines to apply before the law is enacted. Under the guidelines, providers must maintain round-the-clock monitoring and response systems and keep personnel on duty at all times to reflect the 24-hour nature of crypto trading. They must also raise the share of assets stored in cold wallets, which are currently subject to an 80% mandatory custody ratio, as much as possible. Insurance coverage limits and reserve funds must also be expanded.

The regulator is also seeking to broaden membership in the Financial Security Institute. At present, only five of the country’s 28 virtual asset service providers — all exchanges — are members, largely because of user scale and membership fee burdens. Financial authorities plan to encourage the remaining 23 providers to join so they can receive security support services on par with commercial banks, insurers and brokerages. For operators that have difficulty joining, authorities plan to provide support comparable to that available to smaller financial companies, including vulnerability assessments, alert systems and security measures.

Kim Soo-hyun, Hankyung.com reporter [email protected]

Korea Economic Daily