Korea tightens crypto withdrawal rules to fight voice phishing

A representation of the virtual cryptocurrency Bitcoin / Korea Times photo by Shim Hyun-chul

The Financial Supervisory Service (FSS) said Thursday that it will strengthen enforcement of the withdrawal delay system at cryptocurrency exchanges to prevent voice phishing scams.

Stolen funds are frequently converted into virtual assets. To address this, the system temporarily restricts withdrawals of virtual assets — particularly by new users — to external wallets for a designated period.

For instance, the exchanges impose a 72-hour delay on virtual asset withdrawals following the first Korean won deposit into a user's exchange account. For existing users, a 24-hour delay is applied to withdrawals of virtual assets equivalent to newly deposited Korean won funds.

Since 2019, Korea's top five major cryptocurrency exchanges — Upbit, Bithumb, Coinone, Korbit and GOPAX — have voluntarily implemented this system to help prevent the transfer of phishing-related funds through virtual assets.

However, Bithumb, Coinone and Korbit suspended the system from July to October 2024, citing the need to improve user convenience. Following the suspension, the FSS observed a significant surge in the transfer of funds linked to voice phishing scams through bank accounts connected to cryptocurrency exchanges.

At Bithumb, the number of voice phishing-related fund transfers via virtual assets jumped from a monthly average of 13 cases before the suspension to 402 cases afterward. Associated losses surged from 26 million won ($18,586) to 10.2 billion won.

At Coinone, cases increased from three to 83, with total losses rising from 115 million won to 7.8 billion won. At Korbit, the number of cases rose from zero to 29, with total losses reaching 2.95 billion won.

The FSS said the three exchanges that had suspended the delay system plan to resume it by the end of May, following system upgrades and updates to their terms of service.

"There are rising concerns that the virtual asset market could be misused as a primary channel for laundering funds from voice phishing scams," an FSS official said.

"The FSS, in cooperation with the Digital Asset Exchange Alliance and industry participants, is actively promoting the robust implementation of the delay system to help minimize the outflow of illicit funds through cryptocurrency."