South Korea to Impose Bank-Level Liability on Crypto Exchanges
South Korea weighs bank-style no-fault liability for crypto exchanges after Upbit breach
South Korea is preparing to apply bank-level, no-fault compensation requirements to cryptocurrency exchanges, aligning them with standards used for traditional financial institutions following a recent breach at Upbit. The Financial Services Commission (FSC) is reviewing provisions that would require platforms to reimburse customers for losses caused by hacks or system failures even when the exchange is not at fault, The Korea Times reported, citing officials and local market analysts.
The no-fault compensation framework currently applies only to banks and electronic payment companies under the Electronic Financial Transactions Act.
The regulatory initiative follows a Nov. 27 incident at Upbit, operated by Dunamu, in which more than 104 billion Solana-based tokens, valued at approximately 44.5 billion won ($30.1 million), were moved to external wallets in under an hour.
Authorities are also responding to recurring platform outages. Data submitted to lawmakers by the Financial Supervisory Service (FSS) shows the country’s five major exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax — reported 20 system failures since 2023, affecting more than 900 users and causing over 5 billion won in combined losses. Upbit accounted for six failures impacting 600 customers.
The planned legislative revision is expected to introduce stricter IT security obligations, higher operational standards, and tougher sanctions. Lawmakers are considering fines of up to 3% of annual revenue for hacking incidents, mirroring the threshold applied to banks. Currently, cryptocurrency exchanges face a maximum fine of $3.4 million.
The Upbit breach has also prompted scrutiny over reporting timelines. Although the incident was detected shortly after 5 a.m., the exchange notified the FSS close to 11 a.m. Some lawmakers have alleged the delay occurred minutes after Dunamu completed a merger with Naver Financial.
Separately, lawmakers are pressing financial regulators to submit a draft stablecoin bill by Dec. 10, warning they will proceed without the government if the deadline is missed. The aim is to bring the legislation to debate during the National Assembly’s extraordinary session in January 2026.
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