Which country targets exchange liability now?

TLDR

South Korea is the country now actively targeting exchange liability, moving to bank-level, no-fault compensation rules for crypto platforms.

1. South Korea will require exchanges to compensate users for hacks or outages regardless of fault, mirroring bank standards per a recent report. Details
2. Japan is preparing legislation to mandate liability reserves for exchanges to cover hack losses, with specifics expected in 2026. Plan

Deep Dive

1. South Koreas No-Fault Model

Koreas regulators are drafting rules that hold crypto exchanges to bank-like, no-fault liability after the Upbit breach exposed consumer-protection gaps. The framework would require compensation for user losses from security incidents or system failures even if the exchange was not negligent. Report

Recent coverage notes fines could be lifted to as much as 3% of annual revenue and systems upgraded to bank-grade standards, tightening accountability across the major platforms. Update

2. Japans Liability Reserves Track

Japans financial regulator plans to require exchanges to set aside liability reserves so customers can be repaid quickly after hacks or unauthorized outflows, with legislation targeted for submission in 2026. The structure would align with reserves already expected of traditional securities firms and follows prior large exchange hacks. Outline

Conclusion

Right now, South Korea is leading the push on exchange liability with a no-fault compensation model, while Japan is preparing reserve requirements. The direction of travel is clear: stronger consumer safeguards and higher operational bars for exchanges, which could benefit users but pressure smaller or underprepared venues.