South Korea's Financial Services Commission announced on November 12 that it plans to issue a no-action letter permitting crypto exchanges to suspend deposits and withdrawals when they suspect a hacking incident. The measure would allow platforms to act preventively before confirming a breach.
Currently, the Virtual Asset User Protection Act prohibits exchanges from blocking deposits and withdrawals without legitimate grounds. A confirmed hacking incident can justify suspension, but crypto exchanges told regulators they were uncertain whether they could act before confirming an attack. The no-action letter would provide regulatory assurance against enforcement for specified preventive conduct.
The FSC has not detailed the qualifying conditions, issue date, or time limits for withdrawal freezes. The announcement addressed deposits and withdrawals but did not specify whether the letter would cover trading suspensions.
Recent Security Incidents Prompt Regulatory Action
On November 6, GOPAX suspended trading, deposits, and regular withdrawals after receiving an email claiming the exchange had been hacked. The platform said it had not verified the threat and reported no loss of customer assets at the time. GOPAX moved most assets from online hot wallets into offline cold wallets while allowing customers to request withdrawals through support channels subject to manual verification.
Earlier in October, Prabang suspended services after detecting abnormal withdrawals from its hot wallet on October 24. The exchange reported losses of approximately $70,000 and said it would compensate affected customers with company funds.
An FSC cybersecurity review in October found that 130 of 555 companies reported areas needing improvement in their controls. A separate investigation identified incidents at 16 firms, including GOPAX operator Streami and Prabang.
Strengthened Security Requirements
The FSC called for crypto exchanges to implement continuous monitoring and stronger protections for customer assets. The regulator urged platforms to keep more assets in cold wallets, which are not connected to the internet. South Korean rules already require operators to hold at least 80 percent of customer crypto offline, with the overall share across operators at least 95 percent.
The FSC recommended that exchanges hold only the amounts needed for trading in hot wallets and consider spreading those assets across multiple wallets. Platforms should maintain sufficient insurance and reserves to compensate customers after an attack.
The regulator also required crypto exchanges to report breaches or suspicious external access attempts promptly to financial authorities and to monitor unusual transactions around the clock.
The FSC plans to bring more crypto exchanges into the Financial Security Institute, which provides threat information and security checks for members. Only five of South Korea's 28 virtual asset businesses had joined. Updated inspection standards will cover wallet access controls, transaction checks, and smart contracts.
