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- South Korea plans to hold crypto exchanges accountable for hacks.
- New regulations introduce stricter penalties and compensation requirements for exchanges.
- Political scrutiny intensifies after major Upbit hack exposes vulnerabilities.
South Korea is introducing new regulations to hold cryptocurrency exchanges accountable for user losses caused by hacks. The Financial Services Commission (FSC) is working on provisions requiring exchanges to compensate users, even if not directly at fault. The Electronic Financial Transactions Act now offers such liability to banks only.
The step was made after one of the largest breaches in one of the biggest exchanges in South Korea, Upbit. More than 104 billion Solana-based tokens, which are estimated to be around 44.5 billion won ($30.1 million), were transferred to external wallets by hackers. The intrusion has led to people questioning the security of the cryptocurrency market, and the regulations have been quickly modified.
Also Read: Spanish Influencer Álvaro Romillo Jailed Over Alleged $300 Million Ponzi Scheme.
New Regulations and Tougher Penalties for Exchanges
The set regulations will introduce more rigid IT security and operation regulations to exchanges. They also will introduce more severe fines, such as the annual revenue fines up to 3 percent. At present, the largest fine is 4.5 billion won ($3.4 million). As of January 2023, 20 system malfunctions have been reported by such major exchanges as Upbit, Bithumb, and Coinone. These malfunctions have impacted more than 900 users and cost it more than 5 billion won.
Upbit has already been associated with six of these failures that have affected hundreds of customers. This is aimed at making exchanges more responsible both in terms of safeguarding user funds and enhancing security.
Political Scrutiny and Pressure for Stablecoin Regulation
The Upbit breach too has elicited political questioning, particularly on the late hack report. Even though the breach was identified in the early morning hours, it took Upbit almost six hours to inform the Financial Supervisory Service (FSS) about it. This was an issue of concern, especially with the merger of Dunamu and Naver Financial.
Besides the regulation of exchanges, congressmen are promoting a stablecoin bill. They have put a deadline of December 10 on regulators to submit a draft. In case of omission, they will initiate the legislation on their own. This shows the dedication of South Korea toward tougher regulations for the cryptocurrency industry.
Also Read: BitMine Acquires $150M in Ethereum, Aims to Secure 5% of Total Ethereum Supply
