South Korea’s FSC Proposes Strict Liability for Crypto Exchanges in Case of Hacks or Failures
South Korean regulators plan to impose bank-style liability rules on crypto exchanges, requiring full reimbursement for user losses from hacks or IT failures, regardless of fault.
South Korea’s financial regulators are drafting legislation that would obligate cryptocurrency exchanges to fully reimburse users for losses resulting from hacks or IT failures, regardless of fault. This proposed framework mirrors protections offered by banks and aims to ensure robust consumer safeguards. It follows a series of high-profile breaches, including the ₩44.5 billion ($48 million) Solana-based token theft at Upbit on Nov. 27, suspected to involve North Korea’s Lazarus Group. The legislation would mandate that exchanges implement enhanced security protocols and meet rigorous operational standards, with penalties comparable to those imposed on banks for non-compliance.
- Financial Services Commission (FSC): South Korea’s primary financial regulator overseeing banking, securities, and other financial institutions, including cryptocurrency exchange compliance.
- Crypto Exchange: An online platform that enables users to buy, sell, or trade cryptocurrencies.
- User Compensation: Financial reimbursement provided to users for losses, typically due to theft, system failure, or other operational issues.