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South Korea's FSC to let exchanges freeze withdrawals before a hack is confirmed
The FSC said it will issue a no-action letter letting platforms suspend deposits and withdrawals on suspicion of an attack, with conditions unstated.
Key takeaways
- South Korea's FSC will issue a no-action letter letting exchanges freeze deposits and withdrawals on suspicion of a hack.
- Current rules allow withdrawal limits only after a hack is confirmed, the regulator's announcement implies.
- The FSC did not specify the conditions exchanges must meet to use the exemption.
- GOPAX halted trading and withdrawals on Friday after a hack threat; it said no hack occurred.
- Prabang stopped operations on 24 October after suspicious hot-wallet withdrawals and lost about $70,000.
FSC plans a no-action letter for early freezes
South Korea's Financial Services Commission (FSC) said on Thursday that it will issue a no-action letter allowing crypto exchanges to suspend deposits and withdrawals when they suspect a hack, not only after an attack is confirmed. A no-action letter is a written assurance that the regulator will not penalise the specified conduct.
The FSC did not say in its announcement which conditions exchanges must meet to use the exemption. Under current rules, a platform may restrict withdrawals only when a hack has already been established, so an exchange that sees a threat but has no proof of an attack risks breaking the law if it closes withdrawals early.
New requirements come with the relief
The exemption comes with additional demands. The FSC said it wants exchanges to strengthen their security, and it set a separate rule for smaller platforms. An exchange that cannot maintain continuous monitoring would run deposits and withdrawals only during working hours, when staff are on site, and would have to warn users in advance.
The regulator's decision follows a run of incidents at Korean exchanges. GOPAX halted trading, deposits and standard withdrawals on Friday after receiving a hack threat. A representative of the exchange said no hack took place, meaning the platform closed preemptively even though the rules did not expressly permit it.
Prabang lost about $70,000
Prabang stopped operations on 24 October after noticing suspicious withdrawals from a hot wallet. Losses came to about $70,000, according to the report.
Both companies were already known to the regulator. In October the FSC examined 555 financial companies across the country and found cybersecurity problems at 130 of them. It separately named Streami, the operator of GOPAX, and Prabang among 16 companies that had earlier security incidents.
What is still open
The main open question is the exact set of conditions under which an exchange may close withdrawals. That will decide whether the measure works as a narrow defence against attacks or becomes a broad ground for blocking withdrawals.
It is also not yet known how many exchanges will choose working-hours-only operations, or how quickly platforms will move a larger share of funds into cold wallets. The FSC decision covers domestic rules for Korean platforms and does not directly change rules elsewhere.
Sources
1 reportThis article was drafted by Clause, an AI reporter of BattleTown News, from the reports listed above.
Frequently asked questions
What did South Korea's FSC announce about exchange withdrawals?
The FSC said it will issue a no-action letter that allows exchanges to suspend deposits and withdrawals when they suspect a hack. The regulator did not specify the conditions attached to the letter.
Why do current rules make early freezes difficult?
Under current rules, an exchange may restrict withdrawals only when a hack has already been established. A platform that sees a threat but has no proof of an attack risks breaking the law if it blocks withdrawals in advance.
What applies to smaller exchanges without round-the-clock monitoring?
The FSC said exchanges that cannot keep continuous monitoring would run deposits and withdrawals only during working hours, when staff are present, and would have to warn users in advance.
This story is for information only. It is not financial, investment or legal advice. Disclaimer
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