South Korea Sets ‘No-Fault’ Rule for Crypto Exchanges

Crypto News Regulation

South Korea Sets ‘No-Fault’ Rule for Crypto Exchanges After Upbit Hack

Written by Aaron S.,

Editor-In-Chief

Last Updated: December 08, 2025

Key Takeaways

South Korea plans to apply "no-fault" liability rules to crypto exchanges, which ensures users can recover losses from hacks or failures;
The FSC reports 20 system failures since 2023, which affected more than 900 users and caused over ₩5 billion in losses across major exchanges;
Proposed reforms expand the Electronic Financial Transactions Act to cover crypto firms with stricter audits, security, and fines.

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South Korea Sets ‘No-Fault’ Rule for Crypto Exchanges After Upbit Hack

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South Korea is preparing to enforce a rule that would hold cryptocurrency exchanges to the same "no‑fault" standards banks follow.

According to a report by The Korea Times, this rule will enable users to recover losses from hacks or system failures, even when the exchange is not at fault.

Data from the Financial Supervisory Service (FSC) shows that from 2023 through September 2025, South Korea's five crypto platforms, including Upbit, Bithumb $603.96M , Coinone $80.32M , Korbit $13.7M and Gopax $1.93M , experienced 20 system failures, which affected more than 900 users and caused losses exceeding 5 billion won.

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Authorities are currently reviewing legislation to expand the Electronic Financial Transactions Act to include virtual asset service providers. The proposed rules would require stronger IT security protocols, regular audits, faster breach reporting, and enable fines of up to 3% of annual revenue.

The November 27 incident at Upbit $1.13B , where over 104 billion Solana SOL $134.90 ‑based tokens were moved to external wallets, exposed serious gaps in protection for users under existing regulations.

The Upbit hack also drew criticism for the delay in reporting. Although the breach was discovered around 5 AM on November 27, notification to regulators did not occur until about 11:00 AM.

Some lawmakers suggested the delay may have been orchestrated to occur just after the merger between Dunamu and Naver Financial.

On November 28, South Korea announced plans to enforce full crypto Travel Rule data sharing for all transactions. What did the FSC say? Read the full story.