South Korea's FSC plans to let crypto exchanges freeze withdrawals on suspected hacks
In brief
- FSC plans a no-action letter permitting preventive deposit and withdrawal suspensions under certain conditions.
- Current rules let exchanges restrict withdrawals only once a hacking incident is clearly established.
- GOPAX halted trading, deposits and standard withdrawals Friday after a hacking threat.
- Prabang reported about $70,000 in losses after abnormal hot-wallet withdrawals on Oct. 24.
What changes for exchanges
Under the rules in force now, exchanges can't block withdrawals without legitimate grounds, and they're explicitly allowed to restrict them only when a hacking incident is clearly established. The planned no-action letter would let them act on suspicion instead (the FSC described it as permitting preventive suspensions under certain conditions).
The distinction matters.
A freeze wouldn't need a confirmed breach behind it. The FSC didn't detail those conditions in the report. Separately, the regulator also called for round-the-clock monitoring and incident response, higher cold-wallet holdings, and stronger insurance coverage and reserves. Exchanges that can't monitor continuously would process deposits and withdrawals only during staffed hours and notify users in advance, the FSC said.
GOPAX and Prabang
Two recent incidents show what these pauses look like in practice. On Friday, GOPAX suspended trading, deposits and standard withdrawals after receiving a hacking threat. A GOPAX representative said no breach had occurred.
On Oct. 24, trading platform Prabang suspended services after detecting abnormal hot-wallet withdrawals. Prabang reported about $70,000 in losses, according to Cointelegraph.
A broader FSC review
The letter isn't the regulator's only recent security move. In October, the FSC identified cybersecurity deficiencies at 130 of 555 financial companies it reviewed nationwide. It separately named GOPAX operator Streami and Prabang among 16 companies involved in earlier security incidents.
For exchange users, the practical shift is simple to state. If the letter is issued as described, a withdrawal pause won't have to wait for a confirmed breach. And under the FSC's separate call, platforms without round-the-clock monitoring would move funds only during staffed hours, with advance notice to users.
Frequently asked questions
What is South Korea's FSC planning for crypto exchanges?
The Financial Services Commission said on Thursday it would issue a no-action letter permitting exchanges to suspend deposits and withdrawals when hacking is suspected. Exchanges wouldn't have to wait until a breach is confirmed. The relief would apply only under certain conditions.
What do the current rules say about blocking crypto withdrawals in South Korea?
Under the rules in force, exchanges are prohibited from blocking withdrawals without legitimate grounds. They're explicitly allowed to restrict withdrawals only when a hacking incident is clearly established.
What other security measures did the FSC call for?
Separately from the no-action letter, the FSC called for round-the-clock monitoring and incident response, higher cold-wallet holdings, and stronger insurance coverage and reserves. It also said exchanges that can't monitor continuously would process deposits and withdrawals only during staffed hours and notify users in advance.
