South Korea's Financial Services Commission (FSC) held a virtual asset industry security meeting on November 12, 2026, outlining additional measures to strengthen crypto platform security. One significant proposal is to issue a no-action letter allowing exchanges to suspend customer deposits and withdrawals when a hack or system intrusion is suspected, without waiting for a breach to be conclusively confirmed.
The proposed approach is intended to reduce the time available for attackers to move stolen assets while addressing legal uncertainty faced by exchanges that take precautionary action after detecting early warning signs.
How Does South Korea Plan to Adjust Exchanges' Authority to Freeze Funds?
Under the policy direction discussed at the meeting, the FSC plans to clarify when exchanges may temporarily restrict deposits and withdrawals in response to suspected cyberattacks. Under the existing framework, platforms generally need a justifiable reason to restrict customer transactions. Taking action before a hacking incident is confirmed can create legal uncertainty.
The regulator plans to use a no-action letter to provide clearer supervisory treatment for qualifying preventive measures. This does not mean exchanges can freeze customer assets arbitrarily. Platforms will still need reasonable risk criteria, internal approval procedures, and incident records, with restrictions proportionate to the security threat.
Why Are 24/7 Monitoring and Cold Wallet Controls a Priority?
The FSC also called for stronger round-the-clock monitoring and incident-response capabilities, alongside efforts to minimize the proportion of assets held in hot wallets. Hot wallets are connected to the internet and support routine deposits and withdrawals, but their connectivity can increase exposure to cyberattacks.
Increasing cold-wallet holdings, improving multi-level approvals, and monitoring unusual transactions can reduce losses if an online system or account is compromised. The regulator also wants more virtual asset service providers to join South Korea's Financial Security Institute and undergo more systematic security inspections.
Authorities are also working toward future digital asset legislation that would further clarify platform security responsibilities and customer compensation arrangements.
How Should Exchanges Build a Response Framework for Suspected Attacks?
A key challenge for exchanges is determining when the threshold for suspending deposits and withdrawals has been reached. Unusual large transfers, abnormal logins, permission changes, unexpected hot-wallet balances, and irregular API activity may all indicate risk. However, a single indicator should not automatically trigger an extended freeze.
Platforms should combine real-time monitoring, risk classification, human review, and emergency approval procedures. They should also define the scope and release conditions of restrictions and provide affected customers with clear notices, complaint channels, and access to asset-status information.
Early intervention can reduce the spread of an attack, but unclear standards may increase the risk of wrongful freezes and customer disputes. Exchanges should strengthen audit trails, customer communication, and post-incident reviews to make security measures explainable and accountable.