Key Takeaways:
- South Korea announced that it will examine local crypto exchanges following a $6.3 billion hack at Binance.
- The exchanges should increase their holdings in cold wallets and improve withdrawal rules, regulators said.
- Platforms were told to boost monitoring, incident response and reserve buffers.
South Korea is stepping up measures to make crypto exchanges safer in the wake of the Binance hack, which resulted in the loss of more than $6.3 billion from the world’s leading digital asset exchange.
The country’s big financial regulator has embarked on an emergency examination of domestic exchanges, including the systems for controlling access to wallets.
South Korea Scrutinizes Crypto Exchange Wallet Security
The Financial Services Commission held an emergency meeting on Nov. 2 with the Financial Supervisory Service, Financial Security Institute, Digital Asset eXchange Alliance and major virtual asset service providers.
The review was centered on the user access to exchanges IT systems and administrator privileges granted to their customers, as well as crypto withdrawals approval and signing from hot wallets.
The regulator directed the platforms to boost the proportion of customer money in cold chains where private keys are not stored online and are less vulnerable to going through remote attacks. Local news reports state that South Korea has already mandated 80% of virtual asset assignees’ customers’ crypto assets be kept in cold wallets.
Binance Hack Puts Hot-Wallet Risks Back in Focus
Binance reported on Oct. 30 that it had seen unapproved withdrawals of about $6.3 billion from Binance’s hot wallets, the FSC said.
Potential attack vectors are being considered, such as vulnerability of employee work computers and access to internal systems or unauthorised contact with the transaction approval or signing systems. The regulator did not present those scenarios as confirmed findings.
Binance has stated that they will compensate their customers with the company’s funds or other reserves. Since then, the exchange has also started to monitor and freeze stolen assets.
Read More: Binance $6.3B Hack Triggers FBI Probe While $3B in Stolen Crypto Gets Frozen
Exchanges Told to Monitor Crypto Flows Around the Clock
Cold storage is just one action that the FSC encourages. The agency also advised exchanges to keep a close watch on deposits and withdrawals, deploy staff dedicated to incident response and issue alerts in a timely manner to unusual access attempts to facilitate industry-wide sharing of information.
Platforms also were advised to make further investments in reserves which could offset any losses incurred in future security threats.
The steps are taken as Binance is grappling with the financial losses from the hack. Binance reported net $4.72B withdrawn in a resumption of withdrawals, though they noted outflows were beginning to ease.
Crypto Security Controls Move Beyond Cold Wallet Ratios
The Binance attack had made a point of how a company’s more assets it stores offline do not somehow single-handedly reduce risks related to privileged accounts, its devices, or systems for signing transactions.
That explains why South Korea’s review is targeting both asset custody and operational controls.
If another attack happens, the FSC will continue its efforts with regulators and crypto businesses to prevent further intrusions and mitigate losses, it said.
Read More: Binance $5.5B Hack Exposed: 50 EIP-7702 Nonces Opened One Hot Wallet in Minutes
