South Korea is preparing to introduce one of its toughest digital-asset regulatory updates yet, as lawmakers push to impose bank-grade “no-fault” liability standards on cryptocurrency exchanges.
The shift follows the November 27, 2025 Upbit hack, where attackers stole an estimated $30–37 million in Solana-based tokens.
If passed, the new rules would force exchanges to fully compensate users for losses, even when the platform is not directly at fault, aligning the crypto sector with protections already applied across traditional financial institutions.
A New Regulatory Standard for South Korea’s Crypto Sector
The Financial Services Commission (FSC) is currently reviewing amendments aimed at closing the regulatory gap between crypto platforms and banks. The proposed framework introduces several major changes designed to reinforce investor protection and operational accountability.
🚨BREAKING: 🇰🇷South Korea to impose bank-level liability on crypto exchanges after the Upbit hack.
This would require crypto firms to repay users for hack losses even if they’re not at fault. pic.twitter.com/9rJEerJjKD
— Coin Bureau (@coinbureau) December 7, 2025
The most notable shift is the introduction of mandatory compensation, requiring exchanges to reimburse users for any losses caused by hacks, system failures, or security lapses. This mirrors the Electronic Financial Transactions Act, which already applies to banks.
Lawmakers are also considering much higher penalties. While the current maximum fine for hacking-related incidents is capped at 5 billion won, the proposal would raise penalties to as high as 3% of annual revenue, significantly increasing the financial consequences for operational negligence.
The regulatory package is also expected to mandate upgraded IT security infrastructure and stricter operational standards across all major exchanges. This includes clearer protocols for wallet management, hot-wallet exposure, internal controls, and real-time threat monitoring.
Another key issue is reporting delays. The November Upbit hack was not disclosed to regulators for more than six hours, a gap that authorities say hindered the initial response. New rules will likely require immediate reporting of suspicious withdrawals or security events.
The Upbit Hack: What Happened
On November 27, 2025, Upbit discovered an “abnormal withdrawal” in one of its hot wallets, leading to the theft of a basket of Solana-based assets, including SOL, BONK, and several SPL tokens.
Upbit’s parent company, Dunamu, absorbed the entire financial loss, ensuring no customer funds were affected.
The event is particularly notable because it occurred on the same date as a major 2019 hack, when attackers stole 58 billion won (around $50 million at the time) worth of Ethereum. Both incidents have been widely suspected to be linked to North Korea’s Lazarus Group, which has repeatedly targeted cryptocurrency entities in the region.
Timing also added pressure. The hack was discovered just as Dunamu was finalizing an acquisition deal with Naver Financial, raising questions about security lapses during a major corporate transition.
A Broader Pattern of Failures Across Korean Exchanges
Regulators are acting not only because of Upbit but due to a multi-year pattern of system instability across the sector.
Between 2023 and September 2025, the top five South Korean exchanges recorded 20 system failures, affecting more than 900 users and generating cumulative losses of 5 billion won.
This track record has intensified calls for stronger consumer protections and predictable redress mechanisms, aligning the crypto market more closely with national financial-sector standards.
A Major Step Toward Comprehensive Digital-Asset Regulation
South Korea has spent the past two years constructing a broader legal foundation for digital assets, and the new measures represent the latest effort to tighten oversight.
If enacted, the liability rule would make South Korea one of the first major jurisdictions to require full, fault-independent compensation from crypto exchanges, potentially setting a regional or even global precedent.
The proposals now move into the refinement phase, where final wording and enforcement mechanisms will be structured. Market participants expect further updates in early 2026, as regulators look to raise security standards, restore investor confidence, and prevent a repeat of recent high-profile breaches.
