South Korea plans to let exchanges freeze crypto withdrawals before a hack is confirmed

South Korea’s Financial Services Commission plans to let crypto exchanges suspend deposits and withdrawals when they reasonably suspect a hack, without waiting for the attack to be confirmed, the regulator said on November 12, 2026.

The no-action letter would apply only under set conditions. It follows GOPAX halting trading, deposits and standard withdrawals on November 6, 2026 after receiving a hacking-threat email.

South Korea introduces crypto withdrawal freeze measures

The Financial Services Commission plans to issue a no-action letter allowing cryptocurrency exchanges to temporarily suspend deposits and withdrawals when there are reasonable suspicions of hacking or unauthorized access.

Under the existing Virtual Asset User Protection Act, exchanges are generally prohibited from restricting customer transactions without legitimate grounds.

Restrictions are permitted when a hacking incident has been clearly established, but the rules have created uncertainty around preventive action.

The proposed Crypto withdrawal freeze framework seeks to address that regulatory gap by allowing exchanges to intervene before an attack is fully confirmed, provided the circumstances satisfy the regulator’s conditions.

However, the proposed arrangement does not give exchanges unrestricted authority to block customer accounts or withdrawals whenever they choose. The regulatory protection is expected to apply under specified conditions.

The FSC’s decision reflects a broader effort to bring cryptocurrency businesses closer to the security standards expected of traditional financial institutions.

Crypto exchanges face stricter security requirements

Beyond the proposed Crypto withdrawal freeze, South Korean regulators are demanding improvements to the operational security of cryptocurrency exchanges.

One major requirement is continuous monitoring. Since cryptocurrency markets operate around the clock, exchanges are expected to maintain adequate personnel and systems capable of identifying suspicious activity and responding to potential attacks at any time.

Platforms that cannot provide 24-hour monitoring will be required to process deposits and withdrawals only during periods when their security teams are available. Customers must also receive advance notification of these operating arrangements.

The regulator is also encouraging exchanges to increase the proportion of customer assets held in cold wallets, which remain disconnected from the internet and are generally less exposed to remote cyberattacks.

South Korea currently requires virtual asset service providers to maintain at least 80% of customer cryptocurrency holdings in cold storage. The FSC has indicated that the industry’s overall cold-wallet ratio already exceeds 95%, although individual exchanges maintain different levels.

Authorities also want exchanges to limit their hot-wallet balances to the amounts necessary for routine transactions. Distributing funds across multiple wallets is another measure being encouraged to reduce the potential impact of a security breach.

Insurance coverage and financial reserves are also receiving greater attention. Exchanges are expected to maintain adequate resources to compensate customers if cyberattacks result in financial losses.

GOPAX and Prabang incidents increase security concerns

The regulator’s latest intervention follows security incidents involving South Korean cryptocurrency platforms, particularly GOPAX and Prabang.

On November 6, GOPAX suspended trading, deposits and standard withdrawals after receiving an email threatening a cyberattack.

The exchange subsequently began moving customer cryptocurrency into offline storage as a precautionary measure.

A GOPAX representative indicated that the platform had not identified an actual security breach or attempted theft when the suspension was announced.

Customers were still able to request withdrawals through the exchange’s support centre, although manual verification and approval procedures could delay the process.

Another incident occurred on October 24, when cryptocurrency platform Prabang suspended its services after detecting unusual withdrawals from its hot wallet.

The exchange reported losses of approximately $70,000 and indicated that affected customers would be compensated using company funds.

However, temporary restrictions could also prevent legitimate customers from accessing their assets while investigations are underway.

The FSC also identified cybersecurity weaknesses at 130 of 555 financial companies examined nationwide in October. GOPAX operator Streami and Prabang were separately identified among 16 companies associated with previous security incidents.

The growing number of security concerns has increased pressure on South Korean authorities to establish stronger safeguards for the country’s digital asset industry.

South Korea plans further cryptocurrency security reforms

The Financial Services Commission is also considering broader legislative changes through its proposed Digital Assets Act.

The planned legislation is expected to introduce stronger information technology security obligations for cryptocurrency businesses, bringing their responsibilities closer to those imposed on traditional financial institutions.

It is also expected to establish greater accountability for financial damages resulting from security failures.

Meanwhile, the Financial Security Institute is expected to expand its involvement in the cryptocurrency industry through vulnerability assessments, security threat information sharing and specialist training.

Only five of South Korea’s 28 registered virtual asset service providers were members of the institute at the time of the announcement.

Regulators want more cryptocurrency businesses to participate in these security programmes, particularly smaller exchanges that may lack the resources to maintain sophisticated cybersecurity infrastructure independently.

The institute is also expected to improve its inspection standards to cover areas such as cryptocurrency wallet security, transaction verification, blockchain infrastructure and smart contracts.

Although the ability to suspend transactions could reduce losses during suspected attacks, it also raises questions about customer access, transparency and the conditions under which platforms can restrict withdrawals.

South Korea’s latest measures reflect a growing recognition that cryptocurrency exchanges must maintain stronger security systems as digital asset adoption expands.

The effectiveness of the Crypto withdrawal freeze policy will depend on how quickly exchanges can identify threats, protect customer funds and restore normal services without unnecessarily disrupting legitimate transactions.