Cold wallets, hot problem: South Korea tells exchanges to freeze up after $6.3B hack

South Korea’s Financial Services Commission has urged domestic crypto exchanges to increase the proportion of user assets held in cold wallets following last week’s $6.3 billion attack on Binance, citing the need to reduce exposure to internet-connected hot wallets.

The FSC said an emergency meeting with the Financial Supervisory Service, the Financial Security Institute, the Digital Asset eXchange Alliance (DAXE) and major crypto service providers reviewed the attack’s impact on South Korea’s crypto market. Regulators examined exchanges’ IT access controls, wallet withdrawal approval and signing procedures, and administrator privileges, while calling on providers to continuously monitor deposits and withdrawals, secure additional incident response personnel, and promptly report unusual access attempts.

Attackers stole about $6.3 billion from Binance’s internet-connected hot wallets and moved most of the funds in about 20 minutes, according to blockchain intelligence firm TRM Labs. Binance has said the vast majority of users’ assets are held in cold storage. South Korean law already requires exchanges to hold at least 80% of users’ crypto assets in cold storage, although holdings vary considerably among major domestic exchanges.

Financial Supervisory Service data cited by local media showed that at the end of September, Upbit’s cold wallet ratio stood at 99.17%, followed by Bithumb at 94.76% and Coinone at 85%. Digital X, formerly Korbit, and GOPAX reported ratios of 82.79% and 80.54%, respectively. Cointelegraph reached out to Upbit, Bithumb, Coinone, Digital X and GOPAX for comment.

The FSC also urged exchanges to set aside additional reserves and implement other immediately available security measures intended to prevent similar breaches and limit potential damage. The regulator said it would continue working with relevant agencies and industry participants on further prevention efforts.

Separately, the Bank of Korea is surveying 18 banks and 13 brokerages about their exposure to crypto-related risks, including major exchange hacks and prolonged market downturns. The central bank’s review began before the Binance attack.