South Korea’s once-active Virtual Assets Committee (VAC) has gone quiet. After being created just a year ago to help steer the country’s crypto regulation roadmap, the committee hasn’t held a single meeting since May — and a major political shift appears to be the reason.
The slowdown comes after the impeachment of former President Yoon Suk-yeol, whose administration pushed for more aggressive crypto reform. His successor, Lee Jae-myung, is charting a different course. Rather than relying on the VAC, the new government is leaning more heavily on cooperation between lawmakers and the Financial Services Commission (FSC). As a result, earlier plans — including a proposal to let publicly traded companies invest in crypto by 2025 — now look unlikely to move forward.
Meanwhile, regulators are pushing ahead with one of the most impactful policy overhauls the country’s crypto sector has ever seen: strict liability rules for crypto exchanges.
The FSC confirmed that South Korea is preparing legislation that would force exchanges to compensate users for losses caused by hacks or system failures — even if the company wasn’t at fault. This approach mirrors strict-liability systems already used in high-risk industries such as automobile accidents and hazardous industrial operations.
The push for tougher protection follows a notable hacking incident at Upbit, the country’s largest exchange. Regulators say the incident exposed a major gap in existing laws. Under the current framework, crypto platforms aren’t covered by the Electronic Financial Transactions Act, meaning users have limited legal recourse when something goes wrong.
The numbers reveal how widespread the issue has become. Between 2023 and September 2025, five leading exchanges reported 20 cyber incidents that affected more than 900 users. Upbit alone recorded six incidents impacting 616 users, while Bithumb reported four incidents involving 326 users. Coinone logged three events that affected 47 users.
The Upbit hack on November 27 — a 54-minute breach in which large volumes of Solana-based tokens were transferred to external wallets — became a turning point. Officials admitted they lacked legal tools to penalize exchanges under existing crypto laws.
Under the proposed reforms, that will change. Exchanges would be required to maintain stricter security standards, hire adequate technical staff, upgrade infrastructure, and submit yearly technology plans to regulators. Fines could also spike sharply, reaching up to 3% of a company’s annual revenue.
Despite the political turbulence and the VAC’s current dormancy, lawmakers appear eager to fast-track these new protections. Many exchanges are already preparing internal adjustments, expecting the regulatory overhaul to pass swiftly.
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