South Korea Cracks Down on Crypto Exchanges with Tough New Liability Rules

South Korea is preparing to implement bank-level liability rules for cryptocurrency exchanges. The Financial Services Commission is reviewing provisions that would require exchanges to compensate customers for losses from hacks or system failures, even when the platform is not at fault.

The proposed regulations follow a recent breach at Upbit, in which over 104 billion Solana-based tokens worth approximately 44.5 billion won were transferred to external wallets in under an hour.

The breach exposed major gaps in consumer protection for crypto users compared to traditional banking customers. Regulators are also reacting to a pattern of recurring outages, with data showing the country's five major exchanges reported 20 system failures since 2023, affecting over 900 users and causing more than 5 billion won in combined losses.