New Security Measures Allow South Korean Crypto Exchanges to Freeze Transactions Amid Hacking Threats

New Measures for Cryptocurrency Exchanges in South Korea

In response to a series of cyber incidents impacting South Korean cryptocurrency exchanges, the Financial Services Commission (FSC) is implementing new measures that will allow exchanges to proactively suspend deposits and withdrawals if they suspect hacking activities. This initiative aims to bolster security within the cryptocurrency sector, acknowledging the growing concerns over safety protocols following these incidents.

Legal Framework for Preventive Action

On Thursday, the FSC announced plans to issue a no-action letter that would provide a legal framework for exchanges to take preventive action under clearly defined circumstances, rather than waiting for a confirmed breach. According to existing regulations, exchanges are only permitted to restrict transactions when there is unequivocal evidence of a hacking event; this shift signifies a more agile response to potential threats.

Enhanced Cybersecurity Practices

As part of the new security measures, exchanges will be required to enhance their cybersecurity practices, including continuous monitoring and timely incident responses. The FSC emphasized the necessity for greater holdings in cold wallets and stronger insurance policies, highlighting that the exchanges lacking 24/7 monitoring capabilities would only handle transactions during operational hours and must inform users in advance of their withdrawal capabilities.

Recent Security Incidents

These developments come in the wake of notable security failures, such as the incident involving the exchange GOPAX, which halted trading and withdrawals following a hacking threat, despite a spokesperson confirming no actual breach occurred. Shortly before that, Prabang, another trading platform, reported abnormal withdrawals from its hot wallet, resulting in the loss of approximately $70,000 and consequently led to a service suspension.

Industry-Wide Cybersecurity Review

Earlier this month, the FSC's review unveiled cybersecurity weaknesses at 130 out of 555 financial entities evaluated nationwide. Among these, GOPAX's operator, Streami, and Prabang were part of a group of 16 firms previously flagged for security concerns. These recent policy adjustments reflect a significant step towards reinforcing the industry's infrastructure and safeguarding customer assets.