South Korea's Financial Services Commission (FSC) is considering raising the share of customer crypto assets that exchanges must hold in cold wallets from 80% to about 99%, according to the regulator's ongoing review. If adopted, nearly all customer funds on Korean exchanges would be stored offline, significantly reducing the exposure to hacking.
What the FSC is weighing
Under current rules, domestic exchanges must keep at least 80% of customer crypto assets in cold storage. That requirement stems from the Virtual Asset User Protection Act, which took effect on July 19, 2024. The proposal under discussion would increase the floor by roughly 19 percentage points, though no new mandatory percentage has been finalized. A higher threshold remains a priority under review, not a rule on the books.
Cold wallets are kept offline, making remote attacks more difficult, while hot wallets are connected to the internet and are more vulnerable. The current 80% rule allows exchanges to keep up to one-fifth of customer holdings in hot wallets; a 99% rule would reduce that to about one coin in every hundred.
Why the timing matters
The idea gained urgency after a reported security breach at Binance. According to research findings, that breach involved unauthorized withdrawals from Binance's hot wallets totaling approximately $6.3 billion. On November 2, 2026, the FSC called an emergency meeting with major domestic exchanges and related bodies to review security practices. Topics included tighter access controls, refined withdrawal procedures, and stronger protection for user assets. Getting more customer funds into cold storage was a central focus. The FSC did not set a new binding threshold at that meeting but pressed for cold storage levels beyond the 80% statutory minimum.
The push did not come out of nowhere. In February 2026, the FSC had already said it would consider moving the cold wallet ratio toward 100% as part of new regulations. The reported Binance incident appears to have accelerated a conversation that was already on the calendar.
Where Korean exchanges stand today
According to end-September 2026 figures, Upbit held 99.17% of customer assets in cold wallets, already above the proposed level. Bithumb reported 94.76% for the same period, clearing the current 80% floor comfortably but sitting a few points short of 99%. Other exchanges showed varying levels of compliance with the 80% rule.
What this means for exchanges and users
For users, the benefit is straightforward: when less money sits in internet-connected wallets, a single breach has less to steal. A hot wallet compromise at an exchange holding 1% online is a very different event from one at an exchange holding 20% online.
The tradeoff is operational. Exchanges need hot wallet liquidity to process withdrawals quickly. If only about 1% of customer assets are online, a burst of withdrawal requests could force platforms to refill hot wallets from cold storage more often. Each refill is a manual, security-heavy process. The research findings note that higher cold storage requirements could raise operating costs and, potentially, influence trading fees. Platforms already near 99% would face little new cost, while smaller exchanges with thinner margins and lower cold storage ratios would need to spend more to comply.
Several things are worth watching from here. First, whether the FSC formally sets a number, and whether it lands at about 99% or moves all the way toward the 100% mark it floated in February 2026. Second, how much time exchanges get to comply, since lower-ratio platforms would need room to restructure their custody setups. Third, whether the other measures raised at the November 2 meeting, such as access controls and withdrawal procedures, turn into formal requirements. Cold storage limits how much can be stolen; those controls address how a breach starts in the first place.
South Korea has built one of the more prescriptive custody regimes for crypto exchanges, with a legal cold storage floor in place since July 2024. Lifting it to about 99% would make the rules stricter still.
