South Korea Pressures Crypto Firms Over Slow Hack Response

Binance has denied reports from South Korean media outlets that it responded slowly to a major hack at Upbit, South Korea's largest cryptocurrency exchange. According to local outlet KBS, South Korean police had requested Binance to freeze 470 million won worth of Solana tokens linked to the breach.

Binance, however, froze only a portion of the requested amount, citing the need for further verification.

The hack, which occurred on November 27, involved unauthorized withdrawals of approximately $36 million worth of Solana-based assets according to reports. Upbit has since taken steps to enhance its security measures, including moving 99% of its assets to cold storage, far exceeding the legal requirement as documented. The South Korean Financial Services Commission (FSC) is also considering stricter liability rules for crypto exchanges following the incident.

Experts and authorities in South Korea are emphasizing the need for faster, coordinated responses between exchanges to prevent further losses in such incidents as research shows. Cho Jae-woo, director of Hansung University's Blockchain Research Institute, noted that while rapid freezes are critical in cyber attacks, exchanges often cite litigation risks as a reason for delayed action.

The hackers reportedly used complex laundering tactics, moving the stolen funds across multiple blockchain networks and token bridges before eventually funneling most of the assets into Binance wallets. This level of obfuscation made it difficult to trace and recover the funds quickly. The 15-hour delay in Binance's freeze has led to questions about the effectiveness of current protocols for handling cyberattacks in the crypto industry.

How Markets Reacted

In response to the breach, Upbit has taken significant measures to enhance its security infrastructure as reported. The exchange has moved nearly all of its customer assets into cold storage and announced plans to further increase that percentage as per updates. These steps are designed to reduce exposure to future attacks and align with South Korea's growing regulatory focus on crypto security according to analysis.

Meanwhile, Binance faced another high-profile issue when its newly appointed co-CEO, Yi He, had her long-abandoned WeChat account hijacked. The incident highlighted vulnerabilities in personal account security and raised concerns about internal controls at major crypto platforms. Binance has since suspended the employee involved in the incident and is cooperating with relevant authorities.

What This Means for Investors

The Upbit hack and Binance's response have underscored the broader challenges facing the crypto industry, particularly in terms of cross-platform coordination and legal responsibility. South Korean regulators are now pushing for a regulatory framework that would impose strict liability on exchanges, similar to traditional financial institutions. This would require platforms to compensate users for losses from hacks or system failures without needing to prove negligence as proposed.

Investors and industry experts are calling for the establishment of a global emergency response mechanism, such as a coordinated hotline or authority, to enable faster freezes in cyberattack scenarios. Such a system could help mitigate damage before stolen funds are further dispersed or laundered as experts suggest. At the same time, there are concerns that stricter liability rules and higher operational costs could drive smaller crypto platforms out of the market according to analysis.

The ongoing investigation into the Upbit hack has also revealed potential links to North Korea's Lazarus Group, a known cybercriminal network as reported. This development adds a geopolitical dimension to the incident and highlights the increasing sophistication of cyber threats in the digital asset space as experts warn. As the industry continues to evolve, the balance between security, regulation, and innovation will remain a key challenge for crypto exchanges and their regulators.