🔐 No-Fault Liability: Korea’s Bold Move Toward Institutional Standards

According to Yonhap News (Dec 7, 2025), South Korea’s Financial Services Commission is reviewing a legal framework that would hold virtual asset operators automatically responsible for hacking-related losses — even without proof of negligence.

This represents a massive shift from current rules, where liability requires evidence of oversight failure. Under the new system, exchanges would bear responsibility by default.

And the stakes are high: lawmakers are considering fines up to 3% of annual revenue for major incidents — identical to penalties faced by traditional banks.

Korea’s message is clear: crypto platforms must carry the same accountability as legacy financial institutions.

🚨 Why Regulators Are Moving Now: 20+ Breaches and Rising Cyber Threats

Over the past several years, Korean exchanges have endured at least 20 notable security breaches, many involving substantial customer losses. These incidents revealed:

• underinvestment in cybersecurity,
• weak internal audits,
• gaps in user-protection frameworks.

With crypto activity surging, regulators argue that platforms managing billions in user funds must meet the same security standards as banks.

🏛️ Eliminating the Regulatory Gap Between Banks and Exchanges

The proposed rule is modeled on the Electronic Financial Transactions Act, which already imposes no-fault liability on Korean banks in cases of digital fraud or voice phishing.

Extending this principle to crypto exchanges signals that Seoul now views them as systemically important financial institutions.

While large players like Upbit and Bithumb have not commented, industry chatter suggests small and mid-sized exchanges fear the operational costs required to comply.

📉 The Cost of Compliance — and the Cost of Failure

If South Korea enacts the proposal, crypto exchanges will be forced to:

• upgrade cybersecurity infrastructure,
• perform more frequent internal audits,
• hire specialized compliance teams,
• strengthen user-protection procedures.

Critics warn that heavy regulation could push smaller operators out of the market. But regulators argue that companies unable to meet these standards should not be handling user money in the first place.

📊 Market Impact: More Regulation, But No Panic

Despite the headlines, major digital assets have remained stable — signaling that investors view the policy shift as:

• a compliance issue, not a systemic threat,
• a step toward long-term infrastructure maturity.

The market appears to believe that stricter standards will ultimately enhance the credibility of Korean exchanges.

🌏 A Turning Point for Crypto Compliance in Asia

If Korea adopts no-fault liability, the policy could become a regional template for Japan, Singapore, Thailand, and other Asian markets evaluating crypto oversight.

The era of “light-touch regulation” in Asia is fading. A new, institution-level regulatory phase is emerging — defined by accountability, consumer protection, and operational resilience.

🧠 ATH.LIVE Take: Heavy Regulation Isn’t Anti-Innovation — It’s Pro-Maturity

At ATH.LIVE, we see Korea’s proposed shift not as a threat, but as a necessary evolution:

• Serious exchanges will thrive under higher standards.
• Undersecured platforms will exit, improving ecosystem resilience.
• User trust and institutional capital will grow as oversight strengthens.

“No-fault liability isn’t a punishment — it’s the filter that separates professional infrastructure from the rest.” — ATH.LIVE

This regulatory shift is especially relevant for Thailand and Southeast Asia, where policymakers are watching closely. Exchanges that invest now in compliance and cyber protection will dominate the next phase of Web3 finance.