South Korea has revealed its plans to apply bank-level liability rules to cryptocurrency exchanges following a major security breach at Upbit.
As the breach exposed significant shortcomings in investor protection, the proposed regulation would require crypto platforms to compensate users for losses caused by hacks or system failures, even if the exchanges themselves aren’t at fault.
Proposed change toward bank-style compensation
According to officials at the Financial Services Commission (FSC), exchanges would have to meet the same ‘no-fault’ compensation standard currently imposed only on banks and electronic payment providers under Korea’s Electronic Financial Transactions Act. Under this model, an exchange would be responsible for reimbursing customers for losses irrespective of whether it was negligent or not.
The call for this regulatory shift comes after the 27 November incident at Upbit, operated by Dunamu. During this breach, more than 104 billion tokens denominated in Solana were moved to external wallets, a value of roughly USD 30.1 million, within an hour.
In addition, data submitted by the Financial Supervisory Service (FSS) shows that five of the country’s largest exchanges, Upbit, Bithumb, Coinone, Korbit and Gopax, have suffered 20 system failures since 2023. These outages reportedly affected over 900 users and resulted in combined losses exceeding USD 3 million. Upbit alone accounted for six of those incidents, impacting about 600 customers.
Under the new proposals, exchanges might also face more stringent IT-security requirements, new operational standards and tougher enforcement. There is a discussion of penalties amounting to as much as 3% of annual revenues for hacks, which is the same threshold currently applied to banks, compared with the existing maximum fine of around USD 3.4 million for exchanges.
At the same time, South Korean legislators are pressing regulators to finalise a draft bill on stablecoins in December 2025. They have warned that, should regulators fail to meet this deadline, the legislature may proceed on its own. The aim is to have the stablecoin legislation ready for debate during an extraordinary session of the National Assembly scheduled for January 2026.
