South Korea Tightens Crypto Withdrawal Rules to Combat Fraud

South Korea's Financial Services Commission (FSC) has announced a significant tightening of exemption rules within cryptocurrency exchanges' withdrawal-delay systems. The regulator aims to eliminate inconsistencies that allowed fraudulent actors to move funds rapidly through accounts with limited history. Developed in coordination with the Financial Supervisory Service (FSS) and the Digital Asset eXchange Alliance (DAXA), the new framework replaces fragmented, exchange-specific criteria with unified national standards. Previously, bad actors exploited lenient requirements regarding account age and trading volume to bypass security delays. The urgency of the measure is highlighted by data from June to September 2025, which revealed that accounts granted exemptions accounted for 59% of fraudulent accounts and 75.5% of total losses related to voice-phishing. Under the new guidelines, exchanges must now rigorously evaluate trading frequency, account history, and the volume of deposits and withdrawals. The FSC estimates that these stricter requirements will reduce the pool of eligible users for exemptions to approximately 1%. This initiative is part of a wider regulatory crackdown. The FSC recently mandated that exchanges reconcile internal ledgers with actual assets every five minutes following operational failures at Bithumb. Additionally, licensing scrutiny has been expanded to include major shareholders of exchanges to ensure higher standards of risk management.