FSC Holds Emergency Meeting After Binance Hack, Urges Greater Use of Cold Wallets

Financial regulators recently urgently convened major domestic virtual asset exchanges in connection with a hacking incident at global exchange Binance. To prevent similar incidents, they called on the exchanges to increase the share of assets held in cold wallets not connected to the internet and to set aside additional reserves.

The Financial Services Commission said it held an emergency meeting on November 2, chaired by Yoo Youngjun, Director General for Digital Finance Policy, with the Financial Supervisory Service, the Financial Security Institute, the Digital Asset eXchange Alliance (DAXA), and major virtual asset service providers. The meeting reviewed the impact on the domestic virtual asset market and the response systems of virtual asset service providers.

The meeting followed Binance, the world's largest virtual asset exchange, announcing on October 29 that virtual assets worth approximately $6.3 billion (about KRW 8 trillion) had been withdrawn without authorization. Possible causes cited include access to internal systems through employees' work laptops and withdrawals enabled by unauthorized access to transaction approval and signing systems.

The FSC focused on reviewing access controls for the IT systems of domestic virtual asset service providers, approval and signing procedures for withdrawals from wallets such as hot wallets, and the management of administrator privileges.

In particular, it ordered providers to increase the share of assets held in cold wallets not connected to the internet to prevent similar security incidents. Under the current Act on the Protection of Virtual Asset Users, virtual asset service providers must keep at least 80% of customer assets in cold wallets, although the ratio varies by provider.

It also called on providers to strengthen security measures. They were told to ensure continuous monitoring of deposits and withdrawals, secure additional response personnel, and operate a rapid response system, including reporting and sharing information about abnormal access attempts. The FSC also emphasized additional security measures that could be implemented immediately, such as setting aside further reserves.

The FSC said, "We plan to continue strengthening our response systems in close cooperation with relevant agencies and the industry to prevent further security incidents such as hacking and limit the spread of damage."

This content was produced with the assistance of AI translation services.