South Korea Tightens Crypto Rules After Record Binance Breach

Yu Young-jun, the FSC’s director of digital finance policy, chaired an emergency session with major virtual asset providers and the Digital Asset eXchange Alliance to scrutinize internal security protocols. The discussion centered on tightening administrator access controls and enhancing transaction monitoring. While current law already requires exchanges to keep 80% of client holdings in cold wallets, officials are now weighing a more stringent 99% threshold. This potential shift follows data showing that while industry leaders like Upbit already maintain high offline ratios, smaller operators remain closer to the existing minimum.

Industry representatives have cautioned that such a move could disrupt liquidity, citing the risk of withdrawal delays during periods of high market volatility. If exchanges hold only 1% of assets in hot wallets, they may struggle to process rapid outflows without manual intervention from cold storage. Beyond custody rules, the regulator is pushing for increased financial reserves to ensure exchanges can absorb the impact of future security failures. This push for oversight arrives as Binance works to finalize the restoration of stolen assets, having already replaced roughly 95% of the funds lost in the October breach.