South Korea Lets Crypto Exchanges Freeze Suspected Hack Transfers

South Korea’s Financial Services Commission (FSC) has decided to let virtual asset service providers preemptively suspend deposits and withdrawals when a hack or security breach is suspected, even before an incident is conclusively confirmed. Current law generally prohibits blocking withdrawals without legitimate grounds and clearly allows it when hacking is evident. The new no-action position is intended to give exchanges more room to contain suspected breaches before losses spread.

The FSC said the change responds to industry uncertainty over whether abnormal transactions alone justify an immediate freeze. The regulator cited the speed at which crypto security incidents can escalate and said rapid intervention can be critical to limiting user losses. The measure applies to suspected hacking or intrusion scenarios under specified conditions, rather than granting crypto exchanges unrestricted authority to halt customer activity.

The policy forms part of a broader security package that also calls for stronger 24/7 monitoring, higher cold-wallet usage, larger insurance and reserve buffers, and tighter incident reporting. The next step is issuance of the no-action letter and implementation of the accompanying security guidance, while the FSC continues preparing stricter standards under its planned Digital Asset Act.

Source: South Korea Financial Services Commission.

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