South Korea’s Financial Services Commission (FSC) has proposed a Digital Financial Security Act aimed at strengthening defenses against crypto hacks. The move follows the recent Upbit breach, which resulted in losses of 44.5 billion won (about $32.2 million) and pushed the FSC to seek unified security standards. The FSC disclosed this plan in a December business report to the presidential office, and the proposal now needs to go through the National Assembly before any rules can take effect.
What is the Digital Financial Security Act?
The Digital Financial Security Act is presented by the FSC as a security-first legal framework for digital assets, intended to reduce vulnerabilities exposed by recent incidents. It is described as a comprehensive approach that would set common cybersecurity requirements and operational standards across the sector. For background on related organizational moves at the regulator, see permanent unit for virtual assets.
Why now: the Upbit hack and regulatory catalyst
The FSC explicitly cited the Upbit hack as a key example of the system’s weaknesses and used that incident to justify a unified regulatory response. That breach, reported as a loss of 44.5 billion won (about $32.2 million), served as the stated catalyst for the proposal and focused attention on exchange security. The FSC’s disclosure in a December business report to the presidential office framed the act as a preventive step rather than only a reactive measure.
Key provisions likely included in the act
The FSC described several security and enforcement measures it expects to require, forming the core of the proposed act. The emphasis is on making platform security consistent across providers and improving the ability to respond to incidents when they occur.
- Mandatory cybersecurity practices, including cold storage requirements for customer funds and regular penetration testing.
- Coverage across a wide set of entities: traditional financial firms, electronic financial service providers and all virtual asset service providers (VASPs) such as exchanges.
- Strengthened response systems with enhanced tracking of cross-border transactions and stricter KYC/AML enforcement for crypto activity.
Stablecoins and the broader regulatory framework
The FSC will make clear rules for stablecoins a critical part of the framework, positioning that work alongside security standards for platforms. Clear stablecoin rules are presented as necessary to remove regulatory uncertainty for issuers, exchanges and users within the broader digital asset regime. For additional perspective on the stablecoin policy debate, see materials about stablecoin rules.
Implications for industry and users
Implementing unified security standards may increase compliance and operational costs, a challenge that could be heavier for smaller exchanges and startups. At the same time, clearer rules and enforced security measures can reduce uncertainty and help build confidence among institutional and retail participants. The FSC frames the act as balancing prevention and enforcement to create a more resilient digital finance ecosystem.
Legislative status and next steps
The proposal is currently in the proposal stage and must go through the legislative process in South Korea’s National Assembly before becoming law. The FSC disclosed the plan in its December business report to the presidential office, but no firm timeline for parliamentary review or enactment was provided in that disclosure. Stakeholder consultations and legislative debate are implied next steps in the process.
Why this matters (short note for miners in Russia)
If you run mining rigs in Russia, the direct reach of the proposed act is primarily toward platforms that custody funds and offer exchange services, not individual miners. However, rules that tighten exchange security, KYC/AML and stablecoin handling affect how you move proceeds from mining into fiat or stable assets, and which services you can use reliably. In practice, better exchange security can reduce counterparty risk, while stricter KYC/AML may change onboarding and withdrawal procedures you face when using South Korean platforms.
What to do? (practical steps for miners)
Actions below are practical and do not depend on the law being passed immediately; they help reduce operational risk regardless of jurisdiction.
- Prefer exchanges with clear security practices and transparent custody policies; check whether they describe cold storage and penetration testing.
- Keep KYC documents current and be ready for stricter identity checks when moving funds through regulated platforms.
- Segregate mined coins: keep funds you plan to hold separate from funds you intend to exchange or spend, and consider using custody options that minimize online exposure.
- Monitor official FSC disclosures and exchange announcements for changes to deposit/withdrawal rules or new compliance requirements.
Quick FAQ
What triggered the act? The FSC cited the Upbit hack (loss of 44.5 billion won, about $32.2M) and disclosed the proposal in a December business report to the presidential office. The incident was described as a catalyst for unified security standards.
Who is covered? The proposal is expected to cover traditional financial companies, electronic financial service providers and all virtual asset service providers (VASPs), including cryptocurrency exchanges.
How will it address money laundering? The FSC plans enhanced cross-border transaction tracking and stricter enforcement of KYC and AML rules for crypto transactions as part of the strengthened response system.
When will it pass? The proposal is in the proposal stage and must go through the National Assembly; the FSC disclosure did not include a firm timeline.
