In Brief: South Korea plans to allow cryptocurrency exchanges to suspend withdrawals over suspected hacking threats without requiring confirmation of security breaches. GOPAX and Prabang secu
South Korea’s Financial Services Commission (FSC) plans to authorize cryptocurrency exchanges to suspend withdrawals when suspicious transactions indicate potential cyberattacks. The proposed measure would allow operators to protect customer assets before confirming a security breach.
According to the FSC’s November 12 announcement, regulators will issue a no-action letter permitting preventive transaction suspensions under specific conditions. The decision followed a security meeting chaired by FSC Vice Chairman Shin Jin-chang in Seoul.
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Under the existing Virtual Asset User Protection Act, cryptocurrency exchanges cannot restrict customer deposits and withdrawals without legitimate grounds. Current regulations recognize confirmed hacking incidents but provide limited clarity when operators detect suspicious activity before an attack is verified.
The proposed no-action letter would address this regulatory gap by permitting temporary restrictions when credible security threats emerge. Exchanges must still demonstrate reasonable grounds for intervention, as the measure does not authorize unrestricted freezing of customer funds.
Additionally, the FSC instructed operators to strengthen transaction monitoring and maintain security personnel capable of responding to threats around the clock.
Platforms unable to provide continuous monitoring must limit deposit and withdrawal processing to hours when security teams are available. Affected businesses must notify customers beforehand and maintain sufficient personnel to handle withdrawal requests.
The decision follows security incidents involving South Korean cryptocurrency exchanges GOPAX and Prabang, raising concerns about preventive asset protection.
On November 6, GOPAX suspended trading, deposits, and standard withdrawals after receiving an email threatening a cyberattack. The exchange transferred customer holdings into cold storage while investigating the warning.
GOPAX confirmed that investigators had not identified cryptocurrency theft or an actual hacking attempt when services were suspended. Customers could request withdrawals through support channels, although each transaction required manual verification.
Separately, Prabang suspended operations on October 24 after detecting unauthorized withdrawals from its hot wallet. The incident resulted in approximately $70,000 in losses, with the exchange pledging compensation through company funds.
Both incidents highlighted the operational challenges exchanges face when responding to potential security threats under existing withdrawal restrictions.
Beyond transaction suspensions, South Korean regulators want cryptocurrency exchanges to strengthen asset storage practices and financial protection measures.
Existing regulations require operators to hold at least 80% of customer cryptocurrency in offline wallets. According to the FSC, the industry’s overall cold-wallet storage ratio already exceeds 95%, despite differences between individual platforms.
Regulators have instructed exchanges to limit hot-wallet holdings to amounts necessary for routine transactions and distribute assets across multiple wallets.
Furthermore, operators must review their insurance coverage and financial reserves to ensure sufficient compensation for customers affected by security breaches. The FSC also expects exchanges to maintain effective monitoring systems capable of identifying unusual transfers and unauthorized access attempts.
South Korea’s ruling Democratic Party has separately proposed postponing cryptocurrency taxation beyond January 2027 while lawmakers establish broader industry regulations. As previously reported by 36Crypto, Democratic Party leader Kim Min-seok announced the proposal following consultations with government officials, lawmakers, and cryptocurrency businesses.
The proposal could extend previous postponements to cryptocurrency taxation introduced in 2020, as party officials prioritize the Digital Asset Basic Act before imposing additional tax obligations on investors.
The legislation would establish a comprehensive regulatory framework while giving businesses sufficient time to prepare for compliance requirements. The proposal reflects the government’s wider regulatory agenda, which includes stronger investor protections, clearer operating standards, and improved oversight.
Meanwhile, the FSC plans to introduce additional cybersecurity obligations through proposed digital asset legislation. The measures would require cryptocurrency businesses to meet IT security standards and accept liability for damages comparable to traditional financial institutions.
South Korea’s Financial Security Institute will also expand vulnerability assessments, threat intelligence services, and specialized cybersecurity training. Currently, only five won-market exchanges participate in the institute among the country’s 28 registered virtual asset service providers.
Authorities intend to encourage broader membership while providing alternative security assistance to businesses unable to join. By December 2026, the institute plans to update inspection standards covering transaction verification, wallet access controls, blockchain infrastructure, and smart contracts. Regulators also expect operators to report suspected security breaches and unusual external access attempts promptly to financial authorities.
South Korea’s proposed withdrawal rules would give exchanges clearer grounds to respond to suspected attacks while reinforcing customer asset protection. The separate taxation proposal also places regulatory readiness ahead of additional obligations for cryptocurrency investors.
Also Read: Ripple’s XRPL Lending Protocol Gains Validator Support, Moves Closer to ActivationThe post South Korea to Allow Crypto Exchanges to Freeze Withdrawals Over Suspected Hacks appeared first on 36Crypto.
