South Korea has announced plans to let cryptocurrency exchanges temporarily block deposits and withdrawals when they suspect a hacking attempt, allowing platforms to take preventive action before a security breach is confirmed. The Financial Services Commission said it would issue a no-action letter permitting suspensions under specified security conditions.
In a Thursday announcement, the FSC said the decision followed a security meeting chaired by Vice Chairman Shin Jin-chang in Seoul. Under South Korea’s existing Virtual Asset User Protection Act, exchanges cannot restrict customer deposits and withdrawals without legitimate grounds. The law permits suspensions when a hacking incident is clearly established, but the rules left uncertainty over whether exchanges could stop transactions before confirming an attack.
The no-action letter would provide regulatory assurance for preventive suspensions that meet the specified conditions, while not giving exchanges unrestricted authority to freeze customer funds. The proposed measures follow several security incidents involving South Korean platforms, including GOPAX’s precautionary suspension of services and a hot-wallet breach at Prabang.
The FSC also called for stronger monitoring around the clock, reflecting the cryptocurrency market’s 24-hour trading schedule. Exchanges unable to maintain continuous monitoring would have to process deposits and withdrawals only during hours when their security teams are available. The regulator instructed operators to keep more customer assets in offline storage and review insurance coverage and financial reserves.
South Korea currently requires virtual asset service providers to hold at least 80% of customer cryptocurrency in cold wallets. According to the FSC, the industry’s overall cold-wallet storage ratio already exceeds 95%, although individual exchanges maintain different proportions. Under the new guidance, exchanges should limit hot-wallet balances to routine transaction needs and consider spreading funds across multiple wallets.
On November 6, GOPAX suspended cryptocurrency trading, deposits and standard withdrawals after receiving an email threatening a cyberattack. The exchange began transferring customer assets into cold wallets while investigating the threat. On October 24, Prabang suspended operations after detecting abnormal withdrawals from its hot wallet, reporting losses of approximately $70,000 and saying it would compensate affected customers using company funds.
The FSC intends to introduce additional cybersecurity obligations through its proposed Digital Assets Act. South Korea’s Financial Security Institute will expand security support for cryptocurrency businesses and update its security inspection standards by the end of 2026, covering transaction verification, wallet access controls, blockchain systems and smart contracts.
