South Korea will let crypto exchanges halt withdrawals when a hack is only suspected, shielding them from penalties with a no-action letter

South Korea is giving its crypto exchanges permission to freeze withdrawals early. The Financial Services Commission said on Thursday that exchanges may block deposits and withdrawals when a hack is suspected, before it is confirmed, the Korea Economic Daily (Hankyung) and crypto.news reported. The decision came out of a security meeting chaired by FSC Vice Chairman Shin Jin-chang.

Under current rules, an exchange may restrict deposits and withdrawals only when a hack is clearly established, and doing so earlier can bring sanctions. The FSC will close that gap with a no-action letter, a written assurance that it will not punish preventive halts that meet set conditions. Those conditions include monitoring suited to 24-hour trading and staff on duty around the clock. Exchanges that cannot watch all day must limit deposits and withdrawals to staffed hours and warn customers in advance, crypto.news reported.

Exchanges must keep at least 80% of customer crypto in offline cold wallets; the FSC wants that share pushed as high as possible, along with bigger insurance cover and reserves. Of 28 registered operators, five exchanges have joined the Financial Security Institute, and the FSC wants the rest to follow. A planned Digital Asset Basic Act would hold operators to financial-firm security standards and make them liable for damages.