South Korean regulators approve preemptive withdrawal halts for crypto platforms facing hack risks
The regulatory shift comes in response to a series of recent security threats targeting cryptocurrency exchanges in South Korea, including a precautionary service shutdown at GOPAX and a hot-wallet security breach at Prabang that resulted in losses of approximately $70,000.
The Financial Services Commission (FSC) of South Korea is preparing to authorize cryptocurrency trading platforms to halt deposit and withdrawal operations when cyberattacks are merely suspected, eliminating the requirement to wait for confirmed breaches before taking protective action, as part of broader efforts to enhance security standards across the digital asset industry.
The FSC announced on Thursday its intention to release a no-action letter that would permit such preventive suspensions under specified circumstances. Existing regulations forbid exchanges from blocking user withdrawals without valid justification and only explicitly permit such restrictions when a hacking attack has been definitively confirmed.
The financial regulator additionally advocated for continuous 24/7 monitoring capabilities and incident response systems, increased utilization of cold-wallet storage solutions, and enhanced insurance protection along with greater financial reserves. According to the FSC, cryptocurrency exchanges that lack the capacity for continuous monitoring operations would be required to limit deposit and withdrawal processing exclusively to business hours when staff members are present, and must provide advance notification to their user base.
This regulatory adjustment follows a wave of recent security challenges affecting cryptocurrency exchanges operating in South Korea. Last Friday, the crypto exchange platform GOPAX halted all trading activities, deposits and regular withdrawals following receipt of a hacking threat, though a company spokesperson clarified that no actual security breach had taken place. On Oct. 24, the trading platform Prabang suspended its services after identifying unusual hot-wallet withdrawal activity, with the company reporting approximately $70,000 in financial losses.
During October, the FSC discovered cybersecurity vulnerabilities and weaknesses at 130 out of 555 financial institutions examined throughout the country. In a separate assessment, the regulator specifically identified Streami, which operates GOPAX, along with Prabang among a group of 16 companies that had been implicated in previous security incidents.