The Financial Services Commission conducted an emergency inspection into the management status of “hot wallets” at domestic virtual asset exchanges, prompted by the recent hacking incident at Binance. This move was based on the assessment that internet-connected wallets could serve as a channel for hacking. The Financial Services Commission focused its inspection on access controls to computer systems and hot wallets at domestic operators, and directed measures such as increasing the proportion of cold wallets and accumulating additional reserves to prevent damage.
On Monday, the FSC held an emergency meeting chaired by Digital Finance Policy Officer Yoo Young-jun, along with the Financial Supervisory Service, the Korea Financial Security Institute, DAXA (Digital Asset Exchange Association), and major virtual asset operators, to review the impact of the Binance hacking incident on the domestic market and the response systems of operators.
The primary cause of the Binance hacking incident was identified as the possibility of internal system access through employees’ work laptops. It is also suggested that unauthorized access to the transaction approval and signature system may have led to the withdrawal of virtual assets. A hot wallet is a virtual asset wallet connected to the internet, used by exchanges to process deposits and withdrawals. Unlike cold wallets, which are isolated from the internet, hot wallets carry a relatively higher risk of external exposure.
Accordingly, the FSC focused its inspection on access controls for domestic virtual asset operators’ computer systems, approval and signature systems for wallet withdrawals such as hot wallets, and the management status of administrator privileges.
To prevent security breaches, the commission also urged immediate implementation of security enhancement measures, including increasing the cold wallet ratio, continuous monitoring of deposits and withdrawals, securing additional response personnel, operating a rapid and close coordination system for reporting and sharing abnormal access attempts, and accumulating additional reserves.
Current law requires that more than 80% of users’ virtual assets be stored in cold wallets and that deposited funds be held at banks. To prepare for incidents, operators are required to either purchase insurance or mutual aid coverage, or accumulate reserves of at least 3 billion won (based on the standard for won-denominated exchanges).
The FSC plans to continue strengthening its response system in close cooperation with relevant agencies and the industry to prevent additional security breaches such as hacking and to stop the spread of damage.
Separately, on Oct. 30, an incident occurred in which virtual assets worth approximately $6.3 billion (approximately 8 trillion won) were unauthorizedly withdrawn from Binance’s hot wallet. Binance stated that it is tracking and freezing the stolen assets immediately after the incident and expressed its position that all user losses would be fully compensated with company funds, among other measures.
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