South Korea Moves Toward Strict Bank-Level Liability for Crypto Exchanges
South Korea is preparing a sweeping overhaul of its digital asset regulations, pushing to apply bank-level, no-fault liability rules to cryptocurrency exchanges. The move comes in the wake of the recent Upbit security breach, which exposed critical gaps in the nation’s crypto infrastructure.
According to The Korea Times, the Financial Services Commission (FSC) is reviewing a tough new framework that would require exchanges to reimburse users for losses caused by hacks or system failures — even when the platform itself is not directly at fault. Until now, such stringent no-fault standards have only applied to banks and licensed electronic payment operators under Korea’s Electronic Financial Transactions Act.
The Upbit Hack Sparks Urgent Regulatory Response
The push for reform gained momentum after the Nov. 27 Upbit incident, where attackers funneled more than 104 billion Solana-based tokens — valued around 44.5 billion won ($30.1M) — into external wallets in less than an hour.
The breach intensified nationwide scrutiny of exchange security practices and highlighted the real-world consequences of digital asset vulnerabilities.
Also Read : ECB Says Stablecoin Risks Remain Low in Europe Amid Slow Adoption and MiCA Oversight
South Korea’s Crypto Exchanges Face Bank-Grade Oversight
New data from the Financial Supervisory Service (FSS) shows that Korea’s five largest exchanges — Upbit, Bithumb, Coinone, Korbit, and Gopax — have collectively reported 20 system failures since 2023, affecting over 900 users and causing more than 5 billion won in losses. Upbit alone accounted for six outages impacting nearly 600 customers.
Lawmakers are now considering regulations that would dramatically increase accountability, including:
- Stricter IT and cybersecurity requirements
- Higher operational and compliance standards
- Penalties of up to 3% of annual revenue for security breaches — matching penalties used for banks
- Replacement of the current maximum fine of $3.4 million, which critics say is far too lenient
The Upbit case has also drawn political backlash after revelations that the exchange notified regulators nearly six hours after the hack was detected. Some legislators allege that the delay was deliberate, occurring shortly after Dunamu — Upbit’s operator — finalized a merger with Naver Financial.
Lawmakers Push for Stablecoin Regulation Amid Rising Risks
At the same time, South Korean lawmakers are demanding rapid progress on a long-awaited stablecoin regulatory bill. Officials have been instructed to deliver a full draft by Dec. 10, with the ruling party warning that it will move forward independently if regulators fail to meet the deadline.
The legislation, expected to be debated during the National Assembly of South Korea’s January 2026 extraordinary session, aims to establish clear rules for issuers, reserve backing, consumer protection, and cross-platform interoperability.
A New Era of Accountability for South Korea’s Crypto Industry
South Korea’s aggressive shift toward bank-level crypto liability rules signals a critical moment for the country’s digital asset ecosystem. If enacted, these reforms could create one of the world’s strictest consumer-protection regimes for crypto exchanges — and reshape how platforms operate in an increasingly regulated global market.
