South Korea is preparing a sweeping regulatory overhaul that would hold cryptocurrency exchanges to the same liability standards as banks. The proposed rules come in response to the recent security breach at Upbit and a growing pattern of system failures across the country’s digital asset trading platforms.
According to The Korea Times, citing government officials and industry analysts, the Financial Services Commission (FSC) is reviewing new provisions that would impose no-fault, bank-level compensation requirements on crypto exchanges. Under this model, platforms would be required to reimburse customers for losses due to hacks, outages or system errors — even if the exchange was not directly at fault.
Currently, this no-fault framework applies only to banks and electronic payment providers under Korea’s Electronic Financial Transactions Act.
Upbit Hack Triggers Regulatory Escalation
The regulatory push follows the Nov. 27 Upbit incident, where more than 104 billion KRW worth of Solana-based tokens — approximately $30.1 million — were transferred to external wallets within an hour. Upbit’s operator, Dunamu, has since faced scrutiny not only for the breach but also for the delayed reporting of the incident.
Lawmakers noted that although the hack was detected shortly after 5 a.m., the exchange did not notify the Financial Supervisory Service (FSS) until nearly 11 a.m. Some have alleged that the delay may have been intentional, occurring minutes after Dunamu finalized a merger deal with Naver Financial.
Recurring System Failures Amplify Concerns
New data submitted by the FSS shows that South Korea’s five largest exchanges — Upbit, Bithumb, Coinone, Korbit, and Gopax — recorded 20 system failures since 2023, impacting more than 900 users and causing over 5 billion KRW in combined losses. Upbit alone reported six failures, affecting over 600 customers.
The upcoming legislative revision is expected to introduce:
- •Stricter IT security and operational requirements
- •Heightened accountability standards
- •Penalties of up to 3% of annual revenue for hacking incidents — aligning crypto exchanges with banks
Currently, exchanges face a maximum fine of only $3.4 million, a fraction of what banks can be penalized.
Stablecoin Legislation Also Under Pressure
In parallel with the exchange liability overhaul, lawmakers are pushing regulators to finalize a draft stablecoin bill by Dec. 10. As reported by Cointelegraph, legislators warned they will advance the bill without government input if the deadline is missed. The goal is to bring the proposal to debate during the National Assembly’s extraordinary session in January 2026.