In a significant effort to combat voice phishing scams, South Korea's financial regulatory bodies have mandated that all domestic cryptocurrency exchanges implement a standardized system for delaying withdrawals. This move aims to counter the rising incidence of scams that exploit the speed of transactions.
The Financial Services Commission and the Financial Supervisory Service have announced these new rules, effectively eliminating the discretion that exchanges previously had in allowing users to bypass holding periods, as reported by local news sources. Historically, exchanges had their own rules for exceptions to maintain rapid trading, which fraudsters would learn and use to coach their victims on how to bypass these safeguards.
Voice phishing scams typically involve convincing victims to quickly convert cash into cryptocurrency and transfer it within a short timeframe. Even brief delays can disrupt these scams by giving victims time to reconsider or allowing alerts to be raised before funds are withdrawn.
Under the new regulations, exchanges are required to apply uniform criteria for evaluating withdrawal exceptions, including account history, transaction patterns, and sudden behavioral changes. It is anticipated that less than 1% of users will meet the criteria for immediate withdrawals. Additionally, platforms are expected to enhance identity verification processes and closely monitor fund movements. This development represents a shift towards a nationally standardized approach, differing from the industry-led safeguards seen in markets like the U.S.
and Europe, where withdrawal holds are common but determined by individual companies. Some exchanges even allow users to set their own timelocks to prevent unauthorized withdrawals. The South Korean regulators have not yet responded to requests for further commentary.