In a significant crackdown on phishing scams, South Korea's financial regulatory bodies have mandated that all domestic cryptocurrency exchanges implement a unified, stringent system for delaying withdrawals. This move aims to counter the rising incidence of voice phishing scams that exploit the speed of transactions.
The new rules, announced by the Financial Services Commission and Financial Supervisory Service, eliminate the discretion previously allowed to exchanges to bypass holding periods for withdrawals, as reported by local news outlets. Previously, each platform had its own set of rules for exceptions, which fraud groups would learn and use to coach their victims on how to bypass these safeguards. Voice phishing scams typically involve deceiving victims into converting their cash into cryptocurrency and transferring it within a short time frame.
A brief delay in the withdrawal process can be crucial in interrupting these scams, as it gives victims time to reconsider or allows for alerts to be triggered before the funds are transferred out of the account. Under the new system, exchanges are required to apply uniform criteria for reviewing withdrawal exceptions, including examining account history, transaction patterns, and any sudden changes in user behavior. It is anticipated that less than 1% of users will be eligible for instant withdrawals.
Additionally, platforms are expected to enhance their identity verification processes and closely monitor the flow of funds. This development marks a significant shift from industry-led security measures to a standardized national approach. In contrast, other markets like the U.S.
and Europe have withdrawal holds that are set by individual companies, with some exchanges even allowing users to set their own timelocks to prevent unauthorized withdrawals. The South Korean regulators have not provided further comments on this matter at the time of request.