PiCK
Financial Services Commission reviews raising exchanges’ cold-wallet custody ratio
Summary
- South Korea’s Financial Services Commission said it will review raising virtual-asset exchanges’ cold-wallet custody ratio from 80% to close to 100%.
- The current Act on the Protection of Virtual Asset Users requires exchanges to keep at least 80% of their holdings in cold wallets since July 2024, but calls to raise the ratio are growing, it said.
- The FSC said a higher cold-wallet share could clarify reconciliation between actual holdings and ledger balances and structurally reduce internal system errors and security-incident risks.
South Korea’s Financial Services Commission (FSC) said it will review a plan to raise the share of crypto assets that virtual-asset (cryptocurrency) exchanges must keep in cold wallets from the current 80% to close to 100%.
According to a written response the FSC submitted the previous day to the National Assembly’s Political Affairs Committee on the 20th, the FSC replied to a question from Rep. Kim Hyun-jung of the Democratic Party of Korea asking whether it is willing to raise the cold-wallet custody ratio to near 100%, saying: “We will review it when drafting subordinate regulations for the second-phase legislation, taking into comprehensive account the current state of exchange operations, regulatory trends in major countries, and the Financial Supervisory Service’s inspection results.”
Rep. Kim pointed out that “the current cold-wallet custody ratio remains at around 70–80%,” adding that “there is a need to further reduce the portion handled via hot wallets or traded only on electronic ledgers.”
Under the current Act on the Protection of Virtual Asset Users, in force since July 2024, exchanges are required to store at least 80% of the virtual assets they hold in cold wallets. However, in the wake of recent system glitches and asset-management incidents, calls to raise the ratio are gaining traction again.
Authorities and politicians believe that increasing the share held in cold wallets would make it clearer to reconcile exchanges’ actual holdings with ledger balances, and would structurally reduce risks stemming from internal system errors or security incidents.
A cold wallet is a virtual-asset wallet physically isolated from the internet, making it relatively less vulnerable to external hacking. By contrast, a hot wallet connected to the internet is more exposed to security vulnerabilities and system incidents. For this reason, regulators in major countries require exchanges to keep a significant portion of the virtual assets they hold in cold wallets.
The FSC plans to discuss specific standards as it prepares related subordinate regulations in the course of second-phase digital-asset legislation.
Doohyun Hwang
cow5361@bloomingbit.ioKEEP CALM AND HODL🍀
