South Korea is preparing a major regulatory shift that would introduce bank-level liability rules for domestic crypto exchanges. The move follows growing political pressure and repeated system failures, along with a breach involving Upbit that exposed weaknesses in exchange security and reporting practices.
According to The Korea Times, the Financial Services Commission is reviewing amendments that would require crypto exchanges to compensate customers for losses from hacks and operational failures even when the platform is not directly at fault. This no fault compensation model already applies to banks and electronic payment firms under Korea’s Electronic Financial Transactions Act, but has never been extended to digital asset platforms.
Officials and analysts told local media that crypto exchanges may soon face the same legal responsibilities as traditional financial institutions, marking one of the most aggressive oversight actions South Korea has taken in its digital asset market.
Why South Korea is considering bank-level liability
The regulatory push accelerated after the incident at Upbit on November 27. More than 104 billion Solana based tokens, valued at roughly 44.5 billion won, were moved to external wallets in under one hour. While Upbit said it contained the issue, lawmakers questioned delayed reporting. The breach was detected shortly after 5 am but was not reported to the Financial Supervisory Service until nearly 11 am. Critics alleged the delay occurred minutes after Dunamu, Upbit’s operator, finalized a merger with Naver Financial.
The Financial Supervisory Service also provided new data to lawmakers showing that the country’s five major crypto exchanges have reported 20 system failures since 2023. These failures affected more than 900 customers and caused over 5 billion won in combined losses. Upbit alone recorded six failures impacting about 600 users.
Under the proposed framework, crypto exchanges could face fines of up to 3 percent of annual revenue for hacking incidents. This is the same penalty structure that applies to banks. Today, exchanges face a maximum fine of 4.5 billion won, or about 3.4 million dollars, regardless of revenue.
Analysts say the requirement for bank-level liability would force exchanges to overhaul internal security controls, upgrade IT infrastructure and raise operational compliance standards to meet strict financial sector benchmarks.
Regulatory momentum includes a stablecoin bill deadline
Alongside liability reforms, lawmakers are also pressuring financial regulators to deliver a draft stablecoin bill by December 10. As Cointelegraph previously reported, the ruling party has warned it will push the legislation forward without government cooperation if delays continue. The stablecoin bill is expected to be discussed during the National Assembly’s extraordinary session in January 2026.
South Korea’s combined approach shows an effort to align digital asset oversight with long established financial protections. With exchanges facing higher security requirements, faster reporting obligations and bank-level liability, policymakers aim to reduce risk for retail investors and prevent system failures that have plagued the industry since 2023.
Conclusion
The introduction of bank-level liability would represent a major turning point for South Korea’s crypto sector. Exchanges would be held to the same compensation and compliance standards as banks, reflecting the country’s evolving stance toward consumer protection and digital asset regulation. The Upbit breach and repeated system outages have accelerated calls for stronger rules, and lawmakers appear determined to move quickly.
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