South Korea’s Financial Services Commission announced on November 12 that it will issue a no-action letter for crypto exchanges. This written assurance prevents regulators from enforcing action against firms that block deposits and withdrawals upon suspecting a hack. The FSC clarified this step because current law leaves the practice unclear. Under the Virtual Asset User Protection Act, exchanges may not block transactions without a justifiable reason. A block is permitted only once a hack has clearly occurred. Industry representatives reported confusion over whether they could freeze funds earlier, such as on an abnormal transaction. The FSC pointed to the Binance hack as a case showing that blocking fast is decisive in limiting harm to users. Binance put its losses from hot wallets at $6.3 billion in late October.
Regulatory clarity and security mandates
The release does not mention GOPAX, which halted trading and moved withdrawals to emailed requests approved by hand on November 6. Yonhap reported that GOPAX acted after an email from a group saying it had breached the exchange. Streami, the operator of GOPAX, attended the Thursday meeting where Vice Chairman Shin Jin-chang chaired the session. The meeting also produced an emergency security guideline requiring exchanges to monitor for incidents around the clock. An exchange whose monitoring system cannot run nonstop must limit deposits and withdrawals to hours when the system works normally. Korean rules require exchanges to keep 80% of users’ crypto in cold wallets, but the FSC said the share across all operators is 95% or more. Regulators told exchanges to keep hot wallet balances to the minimum needed to support trading. They also instructed firms to carry enough insurance and reserves to compensate users after a hack. Only five of the country’s 28 crypto businesses have joined the Financial Security Institute for threat sharing and security inspections. The FSC stated it will push more firms to join, noting that the planned letter covers the suspected-hack stage that industry members told the regulator the law leaves unclear.
