South Korea to allow crypto withdrawal freezes on suspected hacking threats
The Financial Services Commission will issue a no-action letter for preventive suspensions following recent security incidents at the GOPAX and Prabang exchanges.
Key takeaways
- 1FSC to issue a no-action letter allowing preventive withdrawal freezes on suspected hacks.
- 2Current rules only allow freezes after a hacking incident is clearly established.
- 3Exchanges without 24/7 monitoring must limit processing to staffed hours.
- 4GOPAX recently suspended services due to a threat; Prabang lost $70,000 in an October breach.
- 5A government review found cybersecurity flaws at 130 of 555 financial firms.
South Korea’s Financial Services Commission said on Thursday it will allow cryptocurrency exchanges to suspend deposits and withdrawals when they suspect a hacking threat. The regulator will issue a no-action letter to permit these preventive suspensions before a breach is confirmed. This policy shift changes existing rules that generally prohibited exchanges from blocking user withdrawals without legitimate grounds and required a hacking incident to be clearly established first.
The commission said the new guidelines are intended to strengthen industry security following recent incidents at local platforms. One such incident involved the GOPAX exchange, which suspended trading and withdrawals last week as a precaution after receiving a hacking threat, though no breach occurred. Another platform, Prabang, suspended its services on Oct. 24 after detecting abnormal withdrawals from its hot wallets that resulted in approximately $70,000 in losses.
Under the new measures, the regulator called for exchanges to implement 24-hour monitoring and incident response systems. Platforms that do not provide continuous monitoring will be required to process deposits and withdrawals only during staffed hours and must notify users of these operating schedules in advance. The FSC said this requirement ensures that suspicious activity can be addressed immediately by staff who are on-site to manage potential threats.
The commission also instructed exchanges to increase the proportion of user funds held in cold storage and to improve their insurance coverage or reserves. A recent government review of 555 financial companies nationwide found cybersecurity deficiencies at 130 of them. The FSC identified 16 companies, including GOPAX operator Streami and Prabang, as having been involved in earlier security incidents or having identified weaknesses in their systems.
South Korean authorities have been increasing their focus on exchange security after a series of high-profile security events in the region. Lawmakers are also currently debating a proposal to delay the implementation of a national crypto tax until 2029 while they work on a new Digital Asset Basic Act. The tax is currently scheduled to take effect on 1 January 2027, but the ruling party has formally proposed a two-year postponement to allow for a more complete legal framework.
The commission’s move to allow preventive freezes is part of a broader push for stronger consumer protection in the digital asset market. By allowing exchanges to act on suspicion rather than waiting for confirmation, the regulator aims to reduce the risk of large-scale asset theft. The FSC said it would continue to monitor the security standards of all registered virtual asset service providers in the country.
Reported and edited by the YourKhabri desk under our editorial policy. Nothing here is investment advice.