After the Upbit hack on 27 November, where over $30 million of Solana-based tokens were stolen, most likely by the North Korean Lazarus Group, the South Korean government is planning to make crypto exchanges follow the same laws as banks in the region.
The Financial Services Commission (FSC) in Korea is putting forward a new law that would require crypto exchanges to compensate users for losses suffered by hacks, regardless of whether the exchange is at fault. This is the same law that applies to banks in the country.
Regardless of fault basically means that users that suffer losses directly from hacks will be reimbursed no matter what.
It should be noted that Upbit did say that they would compensate all users who suffered losses after the hack, despite there being no law that would force them to do so. However, this was more to protect their reputation than a legal requirement.
In short, the new law would order Korean crypto exchanges to reimburse users after hacks.
History of Hacks on South Korean Crypto Exchanges
The Upbit hack in November was just the latest in a long line of hacking incidents in South Korea.
In 2019, Upbit was hacked again in a breach that was later confirmed to have been perpetrated by North Korea’s Lazarus Group.
According to The Korea Times, the five top cryptocurrency exchanges in Korea – Upbit, Bithumb, Coinone, Korbit and Gopax – have suffered 20 breach or system failure incidents since 2023. Upbit recorded 6 of the 20 incidents.
On top of this, there have been concerns about the late reporting of incidents. Upbit failed to report the incident until 6 hours later. Conveniently, the report was made shortly after the scheduled merger of Upbit parent company Dunamu and Naver Financial.
What Will the Bank-Level Rules Mean for Investors?
Under current laws, the South Korean government only has authority to fine crypto exchanges a maximum of 5 billion won (around $3 million). The new law will change that to fall in line with the same penalties applied to banks, that is 3% of yearly revenue as a fine.
For crypto exchanges in Korea, this makes security much more meaningful given the harsher consequences. For investors, it means there’s more of a guarantee to get your money back after a hack, as regulators will be able to order compensation.
Moreover, it will increase the level of KYC required for investors as exchanges seek to prevent costly compliance failures.
How to Better Protect Your Crypto with a Self-Custody Wallet
Although the new law in Korea will probably make crypto exchanges safer, it still does not change the fact that exchanges control your private keys and therefore access to your assets.
Also, the first thing exchanges do after an incident is freeze withdrawals in order to prevent losses. When Upbit was hacked in 2019, withdrawals were suspended for over 6 weeks. Those who needed their money were not able to access it.
The new law is not likely to take effect until next year. Regardless, exchanges will always be a prime target for hackers, given the large amounts pooled on these platforms.
That’s why many investors choose to take back control by placing their crypto in a self-custody wallet. With access to your private keys, withdrawals cannot be frozen like on exchanges.
One option with Korean language support, as well as over 22 other languages is Best Wallet, a secure, easy-to-use self-custody wallet.
Unlike centralized exchanges, Best Wallet gives users full control of their assets without requiring KYC. Security is also a very big priority for Best Wallet, and that’s why it has integrated top-tier technologies like Fireblocks to keep assets secured. It also offers regular tips on how investors can better protect their assets.
Beyond delivering exceptional privacy, control, and security, Best Wallet comes packed with an extensive set of supplementary features. It’s a multichain wallet that seeks to add support for over 60 blockchains, and enable all of their tokens, allowing users to freely buy, send, receive, or swap any crypto that runs on those chains.
Already, the project team has integrated major networks, including Bitcoin, Ethereum, Solana, Polygon, Binance Smart Chain, and Base, reflecting its dedication to building a truly interconnected, user-centric ecosystem. Not only that, but Best Wallet also lets users connect their other wallets to it, and manage multiple portfolios from one place, making it more convenient than ever to trade the market.
There’s also an “Upcoming Tokens” section within the wallet where investors can find pre-launch tokens before they go live and market demand starts affecting their prices. According to some experts like ClayBro, Best Wallet could become one of the most widely used self-custodial wallets in the DeFi space.
Download Best Wallet
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