South Korea’s Financial Services Commission (FSC) held an emergency meeting on November 2, 2026, alongside the Financial Supervisory Service (FSS), the Financial Security Institute, and the Digital Asset eXchange Alliance (DAXA). The meeting addressed security measures following the $6.3 billion hack on the Binance exchange on October 29. Yu Young-jun, Director of Digital Financial Policy at the FSC, directly chaired the session to review exchanges’ internal access permissions, withdrawal authorizations, and system administrator privilege controls.
Supervisory focus centered on customer fund custody mechanisms. Under the Virtual Asset User Protection Act, South Korean authorities are formally reviewing an increase in the mandatory cold wallet reserve threshold - offline storage disconnected from the internet - from an 80% minimum up to 99%.
Hot Wallet Share Shrinks to 100 Units
Industry participants immediately warned of the risks a 99% rule poses to transaction processing speeds for customer withdrawals. According to market calculations, for every 10,000 units of crypto assets held by an exchange, only 100 units would remain in hot wallets - online wallets connected to the internet to handle daily withdrawals. That readily accessible liquidity is drastically cut from previous provisions that permitted 2,000 hot wallet units for the same asset volume.
Beyond wallet custody ratios, regulators are requiring local exchanges to tighten 24-hour monitoring of deposit and withdrawal flows. Exchange operators are also mandated to maintain rapid-response teams to detect and report cross-exchange access anomalies.
Reserve Disparities and the Burden on Smaller Exchanges
FSS data as of late September 2026 revealed wide cold wallet reserve disparities among local exchanges. Upbit held the top spot with an offline storage ratio of 99.17%, followed by Bithumb at 94.76%. Meanwhile, three other exchanges stood at lower levels: Coinone held 85%, DigitalEx 82.79%, and GOPAX hovered near the lower threshold at 80.54%.
Smaller exchanges are expected to bear the heaviest operational liquidity constraints if the 99% threshold is enacted. Bithumb experienced a similar operational disruption last August, when altcoin withdrawal services were suspended for 13 hours after hot wallet reserves ran dry amid a surge in market volatility.
For crypto asset holders in South Korea, the regulatory discussion creates a tangible trade-off: deposited funds are more rigorously shielded against network security breaches, but cashing out funds risks taking significantly longer during periods of elevated trading volume.
Reported via crypto.news.
Also read: Binance’s $6.3B Hack Enters US Election Arena - Trump Cold, Democrats Bring Up CZ’s $2B Donation
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
