South Korea tightens crypto withdrawal exceptions after scams

South Korea's financial regulator narrowed the categories of cryptocurrency transfers that can bypass mandatory withdrawal delays after fraudsters used fast transfers to move stolen funds off trading platforms.

The updated guidance reduces the number of transfers exempt from exchange-imposed holding periods, extending delays in more cases to slow the movement of stolen assets and give victims additional time to respond.

Under the guidance, domestic virtual asset service providers must apply withdrawal holds to a broader set of transactions. Previously common exceptions — internal transfers between user wallets, rapid transfers to whitelisted addresses and small-value withdrawals — will face tighter scrutiny. Exchanges must impose holds on a larger share of outflows, run extra identity checks for transfers flagged as unusual and notify users more promptly when activity is suspicious.

Regulators pointed to recent fraud cases in which scammers initiated withdrawals that routed funds through multiple accounts and platforms within hours, reducing the window for exchange risk teams or law enforcement to freeze assets.

Exchange operators are required to update risk-detection tools, modify withdrawal workflows and strengthen customer verification for more types of transfers. Industry participants expect increased technical work and heavier customer-service loads as firms handle longer holds and more manual reviews.

Consumer groups welcomed the change, noting longer delays can improve the chances of recovering stolen funds and reduce pressure on victims to act quickly. Some market participants warned that broader delays could inconvenience legitimate users and slow routine trading and transfers, particularly for small transactions.

Regulators said the guidance is not intended to halt legitimate crypto activity and directed exchanges to balance faster service for genuine customers with stronger controls to detect and block suspicious transfers. The move continues South Korea's recent regulatory actions requiring platforms to strengthen anti-money-laundering checks, verify customer identities and register with financial authorities while authorities monitor for any market disruptions.