South Korea is debating whether crypto exchanges should be on the hook when users lose money in hacks. A proposal from lawmaker Park Seong-hoon would move financial responsibility away from users and onto the exchanges themselves.
What the Change Actually Does
Right now, users usually have to prove an exchange failed to protect their assets. That is not easy to do. The amendment flips that around. Exchanges would need to show they were not responsible for the loss.
They could avoid paying compensation only if they can prove the user acted recklessly, caused the loss on purpose, or if the exchange followed required security rules and the incident still happened.
Why This Is Coming Up Now
South Korea has seen multiple exchange breaches over the past few years. In several cases, users waited months or longer for answers, and some never recovered losses at all. Even when exchanges admitted problems, compensation was unclear.
That has created frustration among retail investors, who make up a large share of the country’s crypto market. Politically, it has become harder to ignore.
New Reporting Rules Included
The proposal is not just about liability. It would also force exchanges to report hacks and system failures immediately. This includes unauthorized access, service outages, or internal security problems.
Delayed reporting has been a recurring issue in past incidents. Regulators argue that faster disclosure could limit damage and improve oversight.
How This Stacks Up Elsewhere
Most major markets do not go this far. Europe and Japan require security standards, but users still carry the legal burden in disputes. In the US, responsibility is usually decided through lawsuits or enforcement actions, not automatic liability.
South Korea would be taking a tougher line by defaulting responsibility to the exchange.
What Exchanges Are Watching
If this passes, costs will likely rise. Security spending will increase, and insurance may become more important. Smaller platforms could struggle, which might thin out the market over time.
From the user side, the rules would make outcomes more predictable. Losing funds would no longer mean starting from zero in a legal fight.
Still Not Final
The proposal is still being reviewed, and a lot depends on how regulators define acceptable security standards. That part will matter more than the headline change.
But the direction is clear. South Korea is signaling that crypto exchanges may no longer be treated as passive platforms. They may be expected to stand behind user losses in a very direct way.
