South Korea to Allow Crypto Exchanges to Freeze Withdrawals on Suspected Hacks

South Korea will allow cryptocurrency exchanges to suspend deposits and withdrawals when they suspect a cyberattack, without waiting to confirm a breach. The Financial Services Commission announced the measure on November 12 as part of a plan to strengthen security across the country's crypto industry.

The regulator will issue a no-action letter allowing exchanges to take preventive action under certain conditions. Current rules prohibit platforms from blocking customer deposits and withdrawals without legitimate grounds and explicitly permit restrictions only when a hacking incident has been clearly established. The new guidance will remove uncertainty over whether exchanges can intervene when they detect suspicious activity but have yet to confirm an attack.

The FSC also called for exchanges to maintain round-the-clock security monitoring and incident response teams. Platforms unable to provide continuous supervision will be expected to process deposits and withdrawals only during staffed hours and notify customers in advance.

The regulator wants operators to keep more customer assets in cold wallets, limit hot-wallet balances to amounts needed for routine transactions, and increase insurance coverage and financial reserves. Although the current minimum cold-storage requirement is 80%, the industry's overall rate already exceeds 95%.

The measures follow recent security incidents involving domestic exchanges. GOPAX suspended trading, deposits, and standard withdrawals on November 6 after receiving a hacking threat, although it reported no confirmed breach. On October 24, another platform, Prabang, halted services after detecting abnormal hot-wallet withdrawals and reported losses of around $70,000.

The FSC is also planning additional cybersecurity inspections and support for smaller exchanges, while preparing legislation that would bring crypto businesses closer to the security and liability standards applied to traditional financial institutions.