South Korean Regulator Urges Crypto Exchanges to Enhance Cold Storage Following Binance Hack

South Korea’s financial regulator has urged domestic cryptocurrency exchanges to increase the proportion of customer assets held in offline cold wallets, following a significant hack on global exchange Binance. The directive from the Financial Services Commission (FSC) aims to bolster security measures in light of the recent large-scale theft.

While South Korean crypto exchanges are already legally required to hold at least 80% of customer crypto assets in cold storage, the FSC is pushing for enhanced precautions. This call came after an emergency meeting on Monday involving the Financial Supervisory Service (FSS), the Financial Security Institute, the Digital Asset eXchange Alliance (DAXA), and major crypto service providers. The meeting reviewed the impact of the Binance hack on South Korea’s crypto market and assessed the security measures currently in place at domestic exchanges.

During the meeting, the FSC examined exchanges’ IT access controls, withdrawal approval processes, and administrator privileges. The regulator also emphasized the need for continuous monitoring of deposits and withdrawals, securing additional incident response personnel, and prompt reporting of unusual access attempts. Exchanges were also advised to set aside additional reserves and implement other immediate security enhancements to prevent similar breaches.

The Binance hack, which saw attackers steal approximately $6.3 billion from the exchange’s internet-connected hot wallets within about 20 minutes, according to blockchain intelligence firm TRM Labs, served as a catalyst for the FSC’s renewed focus on cold storage. Binance has stated that the vast majority of user assets are held in cold storage.

South Korean law mandates that exchanges keep at least 80% of user crypto assets offline. However, cold wallet holdings vary among the country’s major exchanges. Data from the end of September, cited by local media and based on Financial Supervisory Service figures, shows Upbit with a cold wallet ratio of 99.17%, followed by Bithumb at 94.76%, and Coinone at 85%. Digital X (formerly Korbit) reported 82.79%, and GOPAX reported 80.54%.

The FSC indicated that it would continue to collaborate with relevant agencies and the industry to prevent further attacks and mitigate potential damages. The regulator also urged providers to enhance their incident response capabilities and information sharing.

In a related development, the Bank of Korea is currently surveying 18 banks and 13 brokerages about their exposure to crypto-related risks. This review, which began before the Binance attack, includes assessments of risks stemming from major exchange hacks and prolonged market downturns.

The FSC’s warning highlights the ongoing efforts to strengthen security within the cryptocurrency sector, particularly in response to significant security incidents affecting global platforms. The regulator’s focus on cold storage underscores its importance in safeguarding customer assets against cyber threats.

Why This Matters

The materials describe a narrow update: Following a significant hack on Binance, South Korea’s Financial Services Commission (FSC) held an emergency meeting with industry stakeholders and urged domestic crypto exchanges to increase the proportion of customer assets held in offline cold wallets, beyond the existing legal requirement. The extent to which exchanges will comply with the FSC’s urging to increase cold storage.

Broader Context

Source materials place the factual news in this context: South Korean crypto exchanges are already required to hold at least 80% of customer crypto in cold wallets, but the regulator is urging more.