South Korea FSC Plans Conditional Permission For Exchange Freezes On Suspected Hacks

South Korea's Financial Services Commission (FSC) said on 12th November 2026 that it would issue a no-action letter allowing crypto operators to stop deposits and withdrawals when they suspect a hack or intrusion, subject to conditions.

The decision, announced in an FSC press release following a security meeting with the industry, is intended to let operators act before a breach is established. The announced route is a regulator's no-action letter, rather than a change to the Virtual Asset User Protection Act.

The release does not set out the conditions, when the letter will be issued or how long a freeze could last. It therefore does not establish that operators already have this permission.

Under Article 11 of the Act, in the version effective from 2nd October 2026, operators cannot block customers' crypto deposits or withdrawals without a justifiable reason specified by presidential decree. Operators imposing a block must notify users of the reason in advance and immediately report it to the FSC.

The FSC said the industry had raised uncertainty about whether operators could intervene at the suspicion stage, including when abnormal transactions appear. Its stated aim is to allow a faster response to limit harm to users.

Separate emergency guidance calls for continuous monitoring and response, with staff always available to take control measures when incidents are suspected, including unusually large transactions. Operators unable to maintain that coverage are to handle deposits and withdrawals only during hours when their monitoring and response systems can operate normally.

Those operators are to tell users about the restricted hours in advance and provide enough staff to respond to requests promptly. For customers, that could mean access to deposits and withdrawals depends on the operator's monitoring hours (see our earlier report on GOPAX withdrawal restrictions for context).

The FSC also called for operators to maximise cold wallet storage, meaning storage separated from the internet. It said the supervisory requirement is 80%, while operators collectively already keep at least 95% in cold wallets. That industry figure does not establish the storage ratio at any individual exchange.

The release advised operators to keep customers' entrusted crypto assets held in hot wallets to the minimum needed to support transactions and to consider spreading those assets across several hot wallets. It also called for sufficient insurance cover and reserves to compensate users for losses.

The regulator said operators should quickly report intrusions, or signs of a possible intrusion such as abnormal external access attempts. The FSC said the Financial Security Institute plans to improve security inspection standards specifically for crypto exchanges before the end of 2026.

The FSC said a planned Digital Asset Act would impose IT security duties and liability for damages comparable to those of financial companies. The emergency guidance is intended to strengthen security before that legislation is enacted.