South Korean Regulators Push Crypto Exchanges to Boost Cold Wallet Holdings After Major Binance Hack

In a statement released Monday, the FSC announced it had convened an emergency meeting involving the Financial Supervisory Service, the Financial Security Institute, the Digital Asset eXchange Alliance (DAXA), and leading crypto service providers. The purpose was to assess the impact of the Binance hack on South Korea’s crypto market and to re-evaluate the security protocols of domestic exchanges.

During this meeting, the FSC examined access controls for exchange IT systems, authorization and approval procedures for fund withdrawals, and the scope of administrator privileges. The commission additionally called on exchanges to raise the share of crypto assets held offline in cold wallet storage.

According to blockchain analytics firm TRM Labs, threat actors exploited Binance’s internet-connected hot wallets to steal about $6.3 billion, moving most stolen funds within roughly 20 minutes. Binance maintains that the overwhelming majority of users’ assets remain safeguarded in cold storage.

South Korean law already mandates that exchanges hold a minimum of 80% of users’ crypto assets in cold wallets. However, the actual proportions vary significantly across major Korean platforms.

As of late September, Upbit’s cold wallet ratio was reported at 99.17%, followed by Bithumb at 94.76%, and Coinone at 85%, according to data from the Financial Supervisory Service cited by local media. Digital X (previously Korbit) and GOPAX reported ratios of 82.79% and 80.54%, respectively.

The FSC further urged crypto service providers to maintain continuous monitoring of deposits and withdrawals, bolster incident response teams, and promptly report and share information regarding suspicious access attempts.

Exchanges were also advised to create additional reserves and urgently implement further security measures capable of immediate deployment to prevent similar violations. The regulator affirmed its commitment to ongoing collaboration with relevant agencies and the industry to prevent future attacks and reduce potential damage.

Cointelegraph reached out to exchanges including Upbit, Bithumb, Coinone, Digital X, and GOPAX for comments on the situation.

This alert from the FSC comes against the backdrop of a separate survey conducted by the Bank of Korea, querying 18 banks and 13 brokerage firms about their exposure to cryptocurrency-related risks, such as large exchange hacks and sustained market declines. Notably, this central bank review began prior to the Binance breach.

The FSC’s call to enhance cold wallet holdings and tighten security protocols underscores South Korea’s commitment to safeguarding the integrity of its crypto market and protecting investors from large-scale breaches.