South Korea Equalizes Crypto Exchanges to Banks in Liability
Date: 2025-12-08 Author: Henry Casey Categories: IN WORLD
The South Korean government intends to radically tighten regulation of cryptocurrency exchanges, effectively equating them to traditional banks in terms of liability. The initiative was prompted by the recent Upbit incident, as well as the accumulated statistics of technical failures on the country's largest trading platforms. According to local media, citing analysts, regulators plan to implement rules that will require exchanges to compensate users for losses, regardless of who is at fault for the hack or technical failure.
The Financial Services Commission (FSC) is the lead developer of these changes. The prepared amendments include a wide range of new requirements. Key points include mandatory compensation payments to affected clients, a review of IT security standards, enhanced oversight of internal processes and personnel, and the introduction of stricter penalties for violations. In particular, financial penalties can reach 3% of a company's annual turnover, similar to those in the banking sector.
Currently, the maximum fine for crypto exchanges in South Korea is capped at 5 billion won, equivalent to approximately $3.4 million. Authorities consider this threshold insufficient for the rapidly growing digital asset market, whose volume continues to expand and whose user base numbers in the millions.
According to the Financial Supervisory Service (FSS), since 2023 alone, the country's five largest crypto platforms—Upbit, Bithumb, Coinone, Korbit, and Gopax—have experienced at least 20 serious system failures. These incidents affected more than 900 users, who temporarily lost access to their funds or suffered direct financial losses.
Journalists note that the regulators' new approach reflects a desire to bring large crypto exchanges into line with traditional financial institutions. This means not only strengthening oversight of legal compliance but also the implementation of comparable standards for consumer protection, risk management, and cybersecurity.
Furthermore, companies are expected to invest heavily in updating their IT infrastructure, modernizing data storage systems, and protecting against external attacks. Personnel controls are also being tightened, with plans to increase requirements for specialists responsible for security and technical support of trading platforms.
Against this backdrop, it is also known that South Korea is continuing to develop a regulatory framework for other segments of the digital asset market. Specifically, a draft regulation for the stablecoin sector is expected to be submitted by December 10, 2025. This confirms the country's strategic focus on comprehensive and strict regulation of the crypto industry, aimed at increasing market transparency and protecting investors.
