South Korea is moving to tighten crypto exchange controls after regulators found that accounts allowed to skip withdrawal delays were tied to much of the country’s voice-phishing damage linked to virtual assets.
The latest step comes as officials also push stricter oversight after exchange control failures, anti-money laundering issues, and growing concern over how quickly fraud proceeds can move across trading platforms.
South Korea tightens withdrawal-delay exceptions
South Korea’s Financial Services Commission plans to strengthen the rules that let some exchange users bypass withdrawal delays. The revised framework was prepared with the Financial Supervisory Service, the Digital Asset eXchange Alliance, and local crypto platforms.
The FSC explained on Wednesday that exchanges had been using their own exemption standards without a shared minimum rule. That created gaps that criminals could exploit once they met easy conditions such as account age, trading history, or past deposit activity.
The regulator disclosed that the problem became clear during a recent review. From June to September 2025, accounts granted withdrawal-delay exemptions made up 59 percent of scam-linked accounts at crypto exchanges. Those same accounts represented 75.5 percent of related losses during that period.
Under the new approach, exchanges must apply unified standards when deciding who can qualify for an exemption. The FSC noted that platforms will need to review trading frequency, account history, and deposit and withdrawal amounts before allowing faster access to outbound transfers.
Meanwhile, the updated rules also set clearer boundaries for cases where exceptions should not be granted. Authorities expect that change to make it harder for fraudsters to move funds quickly after converting them into crypto.
A simulation conducted under the new framework found that the share of users eligible for exemptions could fall to around one percent.
The FSC did not provide the prior comparison level, but presented the result as evidence that the tighter standard would sharply narrow the pool of approved users.
The revised system takes effect through standard internal operating rules distributed to exchanges. Officials presented the move as part of a broader effort to close loopholes in daily exchange operations and limit channels commonly used in financial scams.
Voice-phishing cases drove the review
The FSC linked the tougher rules directly to voice-phishing abuse involving crypto accounts. It described a pattern in which victims transfer cash into bank accounts connected to exchange users. The money then moves into exchange-controlled accounts, where criminals buy digital assets and attempt to send them to other platforms or private wallets.
Authorities explained that banks and exchanges can already block parts of that process when a victim reports fraud. Payment suspensions can affect linked bank accounts and exchange master accounts, while exchanges can also restrict the internal accounts tied to suspected fraud.
The larger weakness appeared at the withdrawal stage. Once an account received an exemption from delay rules, a fraudster could move crypto out much faster. That left less time for detection, tracing, and recovery.
To address that gap, the FSC outlined tighter follow-up checks for users who still qualify for exemptions. Exchanges will need to verify the source of funds on a regular basis and build systems that track suspicious withdrawal activity more closely.
The regulator also indicated that monitoring will not stop with the first approval. Exempted customers will face periodic reviews, with exchanges required to collect and analyze withdrawal-related data so that unusual behavior can be identified earlier.
Officials added that the rules will continue to be reviewed as trading patterns change. If new workarounds appear, the FSC and FSS intend to revise the standards again with DAXA and the exchanges.
At the same time, the regulator made clear that the system is not meant to block legitimate activity in every case. Limited exemptions will still be allowed where immediate withdrawals are needed for reasons unrelated to voice phishing, including liquidation.
Broader pressure grows after Bithumb and AML issues
The withdrawal-delay changes form part of a wider tightening cycle for South Korea’s crypto sector. On Wednesday, the FSC instructed exchanges to reconcile internal ledgers with actual asset holdings every five minutes.
That order followed an inspection linked to Bithumb’s Bitcoin payout error. Regulators found weaknesses in internal controls and risk management systems, raising fresh questions about how exchanges manage customer balances and operational safeguards.
South Korea has also expanded scrutiny beyond platform operations. On January 29, authorities widened crypto licensing review to include not only exchanges but also major shareholders. That step showed that the government wants closer oversight of both ownership and management.
Anti-money laundering enforcement has also added pressure. As we reported last month, Bithumb faces a fine of about $24 million and a six-month partial service suspension over alleged AML breaches. The decision was reportedly finalized by the Financial Intelligence Unit after a sanctions review.
If enforced as reported, the six-month partial suspension would be the longest sanction period imposed on a domestic exchange in South Korea. The case adds to a firmer message from authorities that control failures will draw direct penalties rather than warnings alone.
Taken together, the latest actions point to a more hands-on regulatory posture. Officials are relying less on broad guidance and more on operational rules, frequent checks, and punitive action where oversight falls short.
Payments and ETF ambitions still move ahead
Even with tighter controls, South Korea’s crypto market continues to develop in other areas. Crypto.com recently teamed up with KG Inicis to expand crypto payment access across a wide merchant network in the country.
The partnership will integrate Crypto.com Pay into businesses served by KG Inicis. The service is aimed in part at foreign travelers, who may be able to pay for goods and services with crypto instead of relying on currency exchange or local payment methods.
That arrangement shows that digital asset use in South Korea is still advancing beyond exchange trading. While regulators tighten fraud controls and operational standards, firms are still pushing for broader payment use in everyday commerce.
In addition, the traditional finance sector is also keeping crypto-linked products in view. In January, the Korea Exchange expressed interest in expanding its product lineup to include derivatives and crypto exchange-traded funds as part of a wider capital market modernization plan.
KRX chairman Jeong Eun-bo stated at the first trading day ceremony of the year that the exchange was ready to offer crypto ETFs if authorities allow them under current securities law. His remarks signaled that major financial institutions are preparing for broader digital asset exposure if policy permits.
Elsewhere, on Wednesday, the presidential Blue House indicated that the government would work to help South Korean ships pass through the Strait of Hormuz as soon as possible. The effort would depend on conditions created by the two-week ceasefire between the United States and Iran, according to Reuters.