South Korea to Impose Bank-Level Liability on Crypto Exchanges Following Security Failures

South Korean authorities are preparing legislation that would impose bank-level liability standards on cryptocurrency exchanges, following a series of security incidents and system failures at major platforms.

According to data from the Financial Supervisory Service (FSS), the country's five largest exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—reported 20 system failures since 2023, affecting over 900 users and resulting in combined losses exceeding 5 billion won. Upbit alone recorded six separate failures impacting 600 customers.

The proposed legislative revision would introduce stricter IT security requirements, higher operational standards, and significantly tougher penalties for exchanges. Under the new framework, crypto platforms could face fines of up to 3% of annual revenue for hacking incidents, matching the penalty threshold applied to traditional banks. This represents a substantial increase from the current maximum fine of $3.4 million.

Separately, South Korean lawmakers are pressuring financial regulators to deliver a draft stablecoin bill by December 10, threatening to advance legislation independently if the government misses the deadline.

The regulatory push reflects growing concerns about consumer protection in South Korea's active cryptocurrency market following high-profile security breaches and operational disruptions at major exchanges.