South Korea Eyes Bank-Level Rules for Crypto Exchanges After Upbit Solana Hack

• New no-fault compensation rules for crypto exchanges in South Korea will mandate reimbursing users for losses from hacks or failures, regardless of fault.

• The Financial Services Commission is driving these changes to boost consumer protection and regulatory compliance in the crypto sector.

• From 2023 to September 2025, major exchanges reported 20 system failures affecting over 900 users and causing 5 billion won in losses, highlighting the need for stricter measures.

Discover South Korea’s new crypto exchange regulations post-Upbit hack: mandatory compensation, enhanced security, and fines up to 3% of revenue. Stay informed on protecting your investments—read more now!

What Are the New South Korea Crypto Exchange Regulations?

South Korea crypto exchange regulations are evolving to impose stricter liabilities on virtual asset providers, mirroring traditional banking standards. The Financial Services Commission (FSC) plans to enforce no-fault compensation, requiring exchanges to reimburse users for losses from hacks or system failures, even without proven negligence. This shift addresses vulnerabilities exposed by recent incidents and aims to foster a safer digital asset environment.

How Will the Upbit Hack Influence South Korea’s Crypto Exchange Regulations?

The November 27 hack on Upbit, where scammers siphoned over 104 billion Solana-based tokens valued at approximately 44.5 billion won ($30.1 million), has accelerated regulatory reforms. Tokens such as Bonk, Solana, Pudgy Penguins, and the Official Trump token were among those stolen, moved to external wallets in minutes. Under current laws, exchanges face no mandatory compensation obligations, leaving victims without recourse. The FSC’s proposed rules would change this, granting regulators authority to enforce reimbursements similar to those for financial institutions.

Market analysts note that this incident underscores the absence of a robust framework in South Korea’s digital asset space. Traditional finance benefits from stringent consumer protection laws, including automatic liability for breaches. By extending these to crypto, the government seeks to prevent future losses and build trust. Data from the Financial Supervisory Service (FSS) reveals a pattern of issues: between 2023 and September 2025, five major exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—experienced 20 system outages. These affected more than 900 users, resulting in combined losses of 5 billion won. Upbit alone accounted for six failures, impacting over 600 individuals with 3 billion won in damages.

The draft legislation, under review by lawmakers, introduces comprehensive enhancements. Exchanges must implement mandatory IT security infrastructure, face upgraded personnel standards, and adhere to stricter reporting protocols. Penalties could reach 3% of annual revenue for hacking incidents, aligning with traditional finance penalties and far exceeding the current 5 billion won cap. This no-fault approach, already standard for electronic payment firms, would compel crypto platforms to prioritize resilience.

Delayed reporting in the Upbit case has drawn scrutiny. The breach was detected at 5 AM on November 27, yet notification to the FSS occurred at 10:58 AM—a six-hour lag. Some lawmakers suspect this timing coincided with a merger between Dunamu and Naver Financial, potentially to avoid disruptions. While the FSS investigates, sanctions may remain limited under existing rules. FSS Governor Lee Chan-Jin emphasized the challenges: “The hacking is not something we can overlook. However, regulatory oversight clearly has limits in imposing penalties.” His statement highlights the urgency for legislative updates to empower enforcers.

Frequently Asked Questions

What Changes Are Coming for User Compensation in South Korea Crypto Exchanges After the Upbit Hack?

Following the Upbit hack, South Korea’s new crypto exchange regulations will require platforms to provide no-fault compensation for user losses from security breaches or failures. This means reimbursements regardless of whether the exchange was negligent, similar to bank protocols, ensuring victims recover funds up to the affected amount without lengthy disputes.

Why Is South Korea Strengthening Crypto Regulations in 2025?

South Korea is bolstering crypto regulations this year to address rising security risks and protect investors, as seen in the Upbit incident. By applying bank-like standards for liability and oversight, the government aims to create a more stable environment where exchanges prioritize user safety and rapid response to threats.

Key Takeaways

• Stricter Liabilities Ahead: Crypto exchanges in South Korea must now offer no-fault compensation, treating hacks like traditional finance failures to safeguard users.
• System Failures Spotlighted: Data shows 20 outages across major platforms from 2023 to 2025, causing significant losses and prompting mandatory security upgrades.
• Enhanced Penalties and Reporting: Fines up to 3% of revenue and faster breach notifications will enforce accountability, with lawmakers finalizing these rules soon.

Conclusion

South Korea’s push for advanced crypto exchange regulations post-Upbit hack represents a pivotal step toward integrating digital assets with established financial safeguards. By mandating no-fault compensation and rigorous security measures, authorities aim to mitigate risks and enhance consumer trust in the evolving market. As these updates take effect, exchanges must adapt swiftly, and investors should monitor developments closely for informed decision-making in this dynamic landscape.