South Korea is set to introduce bank-equivalent, no-fault liability regulations for crypto exchanges, subjecting them to the same accountability as traditional financial institutions following a recent incident at Upbit.
The Financial Services Commission (FSC) is evaluating new regulations that would require exchanges to reimburse customers for losses due to hacks or system failures, even if the platform isn’t at fault, as reported by The Korea Times on Sunday, citing officials and market analysts.
Currently, the no-fault compensation model is only applicable to banks and electronic payment companies as per Korea’s Electronic Financial Transactions Act.
This regulatory effort follows the Nov. 27 incident involving Upbit, operated by Dunamu, where over 104 billion Solana-based tokens, valued at around 44.5 billion won ($30.1 million), were moved to external wallets within an hour.
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Crypto exchanges under bank-like regulation
Regulators are also addressing a trend of recurring outages. Data provided to lawmakers by the Financial Supervisory Service (FSS) reveals that the five major exchanges in the country—Upbit, Bithumb, Coinone, Korbit, and Gopax—reported 20 system failures since 2023, affecting over 900 users and leading to more than 5 billion won in total losses. Upbit accounted for six failures impacting 600 customers alone.
The anticipated legislative changes are likely to enforce stricter IT security standards, enhanced operational protocols, and harsher penalties. Lawmakers are considering imposing fines of up to 3% of annual revenue for security breaches, similar to the penalties applied to banks. At present, crypto exchanges face a maximum fine of $3.4 million.
The Upbit incident has also attracted political attention regarding delayed notifications. Although the breach was detected shortly after 5 am, the exchange did not inform the FSS until nearly 11 am. Some lawmakers have suggested that the delay was intentional, occurring just after Dunamu completed a merger with Naver Financial.
Related: South Korea targets transactions under $680 in a comprehensive AML initiative
South Korea seeks stablecoin legislation
As Cointelegraph has reported, South Korean lawmakers are urging financial regulators to produce a draft stablecoin bill by Dec. 10, warning they will proceed independently if the government fails to meet the deadline.
The ruling party’s ultimatum stems from slow progress and multiple delays, with officials aiming to introduce the bill for discussion during an extraordinary session of the National Assembly in January 2026.
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