• South Korea will impose no-fault compensation rules on crypto exchanges following the Upbit hack.
• The government aims to tighten security, with fines of up to 3% of annual revenue for major breaches.
• Lawmakers push for a stablecoin bill, setting a December 10 deadline for regulators.

South Korea plans to introduce new rules holding crypto exchanges to the same liability standards as banks. The decision follows a major breach at the Upbit exchange, which exposed vulnerabilities in consumer protection. The Financial Services Commission (FSC) is reviewing provisions that would require exchanges to compensate customers for losses even when not at fault.

The new regulations would mandate that crypto exchanges compensate users for losses caused by hacks or system failures. Currently, this no-fault compensation model applies only to traditional banks and electronic payment firms under the Electronic Financial Transactions Act. The push for these changes gained momentum following the Nov. 27 breach at Upbit, in which over 104 billion Solana-based tokens worth $30.1 million were transferred to external wallets.

Stricter Oversight for Crypto Exchanges Following Recurring Failures

The data breach that happened recently at Upbit, run by Dunamu, has caused the regulators to reconsider the supervision of the crypto exchanges. The Financial Supervisory Service (FSS) statistics position that the 5 biggest exchanges in South Korea have encountered 20 technical breakdowns in 2023. The disruptions impacted more than 900 users and caused total losses exceeding 5 billion won ($3.8 million), with Upbit being responsible for 6 out of the failures and 600 suffering customers.

The new regulatory framework aims to impose stricter IT security requirements and higher operational standards on crypto exchanges. The proposed rules may include fines of up to 3% of annual revenue for hacking incidents, the same threshold used for banks. Currently, crypto exchanges face a maximum fine of $3.4 million, which many consider insufficient for addressing large-scale breaches.

Upbit’s hack has not only resulted in a loss but has also raised questions about the company reporting the incident with a tardy rash. The breach came to light at 5 a.m., but Upbit informed the FSS about it only close to 11 a.m. Some politicians have insinuated that the delay was a tactic, coming right after Dunamu completed a merger with Naver Financial.

South Korea’s Legislative Push for Stablecoin Regulation

Along with imposing stricter rules on crypto exchanges, South Korean legislators are also advocating for a stablecoin bill. The party in power wants financial authorities to present a draft stablecoin bill by Dec. 10. If lawmakers miss the deadline, they have threatened to carry on without the government’s participation.

The proposed legislation is likely to cover a wide range of concerns about stablecoins’ usage and regulation in the country. This move comes after multiple postponements in the bill’s drafting process, and the lawmakers are eager to make a headway before the National Assembly’s special session in January 2026.

The hold-up in stablecoin regulation has created a fear of South Korea losing its competitive edge in the crypto market, which is changing so fast.The new policy of tightening control over the exchanges plus the surety of a stablecoin bill indicates that South Korea is increasingly focusing on the regulation of the crypto market. It is the protection of consumers, in particular, that these efforts are aimed at, and it is the country that will thus be the global crypto industry’s leader.