South Korean Regulators Push for Increased Cold Wallet Usage Following Binance Security Breach
While South Korean cryptocurrency platforms must already maintain a minimum of 80% of client assets in cold wallets, financial authorities are now calling for further increases.
Following last week's massive $6.3 billion cyberattack on Binance, South Korea's Financial Services Commission has called on cryptocurrency exchanges operating within the country to raise the percentage of customer funds stored in cold wallets.
According to a Monday statement, the FSC convened an urgent meeting that brought together representatives from the Financial Supervisory Service, the Financial Security Institute, the Digital Asset eXchange Alliance (DAXA), and leading cryptocurrency service providers to assess how the Binance security breach might affect South Korea's digital asset marketplace and to examine the security protocols of local exchanges.
During the review, the FSC examined various security aspects including IT access control systems, approval processes for wallet withdrawals, digital signing procedures, and administrator privilege management. The commission additionally encouraged service providers to boost the percentage of customer assets maintained in offline cold storage solutions.
Last week's attack on Binance resulted in approximately $6.3 billion being stolen from the exchange's internet-connected hot wallets, with the majority of stolen funds transferred within roughly 20 minutes, according to data from blockchain intelligence company TRM Labs. Binance has confirmed that the overwhelming majority of customer assets remain secured in cold storage.
Existing South Korean regulations already mandate that cryptocurrency exchanges maintain no less than 80% of customer crypto holdings in cold storage, although the actual cold wallet percentages differ significantly across the country's leading exchange platforms.
Based on Financial Supervisory Service data referenced by domestic news outlets, as of the conclusion of September, Upbit maintained a cold wallet ratio of 99.17%, with Bithumb following at 94.76% and Coinone at 85%. Meanwhile, Digital X, previously known as Korbit, and GOPAX recorded ratios of 82.79% and 80.54%, respectively.
The FSC has further encouraged providers to maintain continuous monitoring of deposit and withdrawal activities, ensure adequate incident response staffing, and immediately report and share details regarding any suspicious access attempts.
Exchange operators received recommendations to allocate additional reserve funds and roll out other security enhancements that could be deployed immediately to guard against comparable security breaches. The regulatory body stated its commitment to ongoing collaboration with relevant government agencies and industry participants to prevent future attacks and minimize potential losses.
Cointelegraph reached out to Upbit, Bithumb, Coinone, Digital X and GOPAX for comment.
The FSC's advisory arrives at a time when the Bank of Korea is independently conducting surveys of 18 banking institutions and 13 brokerage firms regarding their exposure to cryptocurrency-related risks, including potential threats from major exchange security breaches and extended market downturns. The central bank initiated this review prior to the recent Binance attack.