Binance’s $6.3 Billion Hack Has South Korea Asking Exchanges to Hold More Crypto Offline

At an emergency meeting on Nov. 2, South Korea’s Financial Services Commission asked major crypto exchanges to move more customer assets into cold wallets, the regulator said, after Binance lost roughly $6.3 billion from its hot wallets.

Alongside more offline storage, the FSC asked operators to keep constant watch on deposits and withdrawals, add incident-response staff, move quickly to report and pass along abnormal access attempts, and build up extra reserves. The release named no Korean exchange and set no new ratio.

According to the FSC’s Korean-language statement, Yoo Young-jun, its director general for digital financial policy, led the session, which brought in major crypto operators, the exchange group DAXA, the Financial Security Institute and the Financial Supervisory Service. Officials reviewed how exchanges restrict access to their IT systems, how hot-wallet withdrawals get approved and signed, and how administrator privileges are handled. They also checked each firm’s insurance and reserves. Staff from Upbit, Bithumb, Coinone, Digital X and Gopax attended, The Herald Business reported.

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Operators must hold at least 80% of the economic value of user crypto offline under the FSC’s supervisory regulation for the Virtual Asset User Protection Act, as the FSC sets out in its guidance. Financial Supervisory Service figures that Rep. Min Byung-deok’s office obtained, published by Block Media on Oct. 26, put Upbit’s offline share at 99.17% as of Sept. 30. Bithumb had 94.76%, Coinone 85%, Digital X 82.79% and Streami, which runs Gopax, 80.54%.

By Unchained’s calculation, the 80% floor lets an exchange keep up to 20% of user crypto online, about 24 times the 0.83% Upbit held outside cold storage. Streami sat 0.54 percentage points above the floor. At a 99% level its online share would shrink by about 95%, the same squeeze News1 illustrated for a hypothetical exchange at the floor.

Lifting the share to the 99% some large exchanges already keep has come up, News1 reported on Nov. 3, attributing that to people in the industry. No FSC official was quoted, and the FSC release does not mention the figure. In February, News1 reported that the FSC was reviewing a ratio of about 100% in the rules for the second phase of crypto legislation.

Industry participants also asked the FSC to ease limits on halting withdrawals when a different exchange is hacked, Yonhap reported, citing the industry. The current law bans arbitrary blocks unless a reason set by presidential decree applies, and the FSC plans to review easing the rules so exchanges can restrict withdrawals quickly in such emergencies, according to Yonhap.

Binance put its losses at about $6.3 billion on Oct. 30 and said it would cover them from its SAFU fund and company funds. The FBI attributed the theft to North Korea’s TraderTraitor, and Binance has since laid out a four-month path from a tainted software install to the drain. In Korea, the Bank of Korea asked 31 financial firms how a hack-driven outage at the exchange with the No. 1 domestic market share would affect them, and Bithumb said an intruder took personal data from an internal employee app.

Related Listen: How Did Hackers Take $388M From Bitget Without a User Withdrawal?

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