South Korea's financial regulator orders emergency checks of crypto exchanges' hot wallets after Binance theft

South Korea’s Financial Services Commission (FSC) has ordered emergency inspections of how domestic crypto exchanges manage their internet-connected “hot wallets”, following last week’s theft of about $6.3 billion from Binance, the Korean outlet Money Today reported on Monday 2 November.

The meeting. The FSC held an emergency meeting on Monday, chaired by its digital finance policy officer Yoo Young-jun, with the Financial Supervisory Service, the Korea Financial Security Institute, the industry body DAXA (Digital Asset Exchange Association) and major crypto firms, to review the impact of the Binance incident on the domestic market, according to Money Today.

What the regulator checked. The inspection focused on access controls to exchanges’ computer systems, the approval and signing systems for withdrawals from hot wallets, and the management of administrator privileges, Money Today reported. A hot wallet is connected to the internet and used to process deposits and withdrawals, while a cold wallet is kept offline.

What exchanges were told to do. The FSC urged exchanges to immediately raise the share of assets held in cold wallets, monitor deposits and withdrawals continuously, add response staff, share reports of unusual access attempts quickly and build up extra reserves, according to the report. Under current South Korean law, more than 80% of users’ crypto assets must be kept in cold wallets, and exchanges must buy insurance or hold reserves of at least 3 billion won, Money Today reported.

The FSC said it would keep strengthening its response with other agencies and the industry, according to the report. See also: the FBI’s attribution of the Binance theft.