South Korea's FSC is preparing new regulations for crypto exchanges

Strengthening Liability for Crypto Platforms

South Korea’s Financial Services Commission (FSC) has announced plans to significantly tighten regulation of cryptocurrency exchanges. According to information published by The Korea Times, citing agency officials, trading platforms may be required to compensate clients for losses even in cases where they are not at fault. Previously, this liability model applied exclusively to banks and electronic payment services under the Electronic Financial Transactions Act.

Equalization with Traditional Financial Institutions

The FSC’s new initiative reflects the regulator’s commitment to treating large crypto exchanges equally with traditional financial platforms. This means implementing comparable standards for consumer protection, internal controls, and risk management. For the rapidly growing Korean crypto market, this approach could be a game-changer, as it strengthens investor confidence but simultaneously increases the burden on businesses.

New IT Security Requirements

In addition to compensation mechanisms, the commission is preparing legislative amendments regarding IT security. Technical standards are planned to be updated, along with stricter requirements for the infrastructure and qualifications of crypto platform personnel. Particular attention will be paid to data protection, system resilience, and the prevention of cyberattacks, which have previously led to failures and leaks.

Fines and Financial Sanctions

Separately, the possibility of introducing fines for hacking incidents amounting to up to 3% of a crypto exchange’s annual revenue is being considered. This threshold is similar to the sanctions applied to banks. For comparison, the maximum fine for trading platforms is currently capped at approximately $3.4 million, significantly lower than the potential new sanctions.

Impact on the Market and Participants

The new rules are expected to primarily affect the country’s largest exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax. According to FSC representatives, stricter requirements will force senior management to pay greater attention to security and the protection of client funds. South Korea’s Financial Intelligence Unit (FIU) has previously warned market participants about increased penalties for non-compliance with cryptocurrency laws, indicating the government’s systematic move toward stricter oversight of the industry.