South Korea to Allow Crypto Exchanges to Freeze Withdrawals Over Suspected Hacks

Highlights:

South Korea wants crypto exchanges to act quickly if they spot signs of a possible hack. Under the proposed rules, exchanges would be able to halt deposits and withdrawals without waiting for confirmation that hackers have breached their systems. The Financial Services Commission (FSC) also wants exchanges to monitor security threats around the clock, hold more customer assets in cold wallets, and improve safeguards against potential losses.

In a November 12 announcement, the FSC outlined the measures following a security meeting chaired by Vice Chairman Shin Jin-chang. The meeting focused on recent cyberattacks affecting cryptocurrency exchanges and ways to prevent further losses.

⚡BREAKING:

🇰🇷 South Korea plans to allow crypto exchanges to freeze deposits and withdrawals when hacks are suspected. pic.twitter.com/QrnjQuHlD6

— Litest (@Litest) November 12, 2026

South Korea Plans to Allow Early Withdrawal Suspensions

The Virtual Asset User Protection Act in South Korea prohibits exchanges from suspending deposits or withdrawals of users without a valid reason. The rules permit restrictions if a hacking incident has been clearly evidenced, but there is little clarity about suspected attacks.  To address this, the FSC plans to issue a no-action letter allowing exchanges to temporarily suspend transactions when they detect signs of unauthorized access or suspicious activity.

The measure would let platforms respond before hackers can move additional funds. However, exchanges would still need to meet specific conditions rather than suspend customer withdrawals without justification. The regulator also called for continuous security monitoring and emergency response systems.

Exchanges that cannot maintain 24-hour monitoring would only be allowed to process deposits and withdrawals when their security teams are available. They must also inform customers in advance and provide enough staff to handle requests.

FSC Pushes Exchanges to Increase Cold Wallet Holdings

The FSC also wants cryptocurrency businesses to reduce their exposure to online security threats by storing more customer assets in cold wallets. However, South Korea has regulations that already mandate that exchanges store at least 80% of users’ cryptocurrencies in offline storage. The industry’s overall cold wallet ratio is currently more than 95%, the regulator said.

The FSC still recommended that exchanges maintain just enough wallets to carry out transactions on the internet, and these would be hot wallets. It also requested increased insurance coverage and increased financial reserves to be available to help customers if a security breach causes damages.

The regulator plans to introduce tougher cybersecurity obligations under the proposed Digital Asset Act. These would bring crypto businesses closer to traditional financial institutions in terms of IT security requirements and liability for customer losses.

Recent Crypto Security Incidents Prompt Stronger Oversight

The announcement follows several security incidents involving cryptocurrency exchanges. On November 6, South Korean exchange GOPAX suspended trading and withdrawals after receiving an email threatening a cyberattack. The company began moving assets from online wallets into cold storage as a precaution. GOPAX said it had not confirmed the threat or detected any loss of customer assets when it announced the suspension.

The FSC also cited the recent Binance hack as an example of why exchanges need to act quickly when they notice suspicious activity. Beyond these measures, South Korea plans to expand security inspections through the Financial Security Institute.

There are 28 registered virtual asset service providers in the country, and only five of them have joined the institute. The FSC wants more businesses to participate in security reviews, threat information sharing, and specialist training. The regulator is also aiming to revise its security inspection requirements by the end of the year, adding more focus on smart contracts, wallets and blockchain systems.