# South Korea Increases Digital Asset Cold Wallet Storage Requirements to 80%
South Korea has increased the required cold wallet storage ratio for digital assets from 70% to 80% under the recently enacted Digital Asset User Protection Act. This measure is aimed at mitigating the vulnerabilities of hot wallets, which are connected to the internet and more susceptible to external attacks. However, the enforcement decree sets the cold wallet ratio based on total assets, leaving the distribution of individual digital assets to the discretion of exchanges.
According to CoinSiren on the 15th, some domestic digital asset exchanges were found not operating separate cold wallets for different assets, indicating variations in operational standards. The current enforcement decree only mandates the overall cold wallet storage ratio concerning total assets, without providing detailed operational guidelines.
Consequently, there are instances where individual asset storage ratios differ, leading to some digital assets being inadequately stored in cold wallets or disproportionally concentrated in hot wallets. A survey conducted by Blockmedia of domestic exchanges in the Korean won market—including Upbit, Bithumb, Coinone, Korbit, and Gopax—revealed that each exchange manages their wallets differently.
Upbit and Bithumb operate both cold and hot wallets for individual digital assets but show differences in the number and management of hot wallets. Upbit manages one cold wallet and multiple hot wallets per digital asset. Deposited assets are transferred to a designated hot wallet, with any surplus assets moved to the cold wallet to maintain a balanced value in each hot wallet. Each hot wallet handles independent transactions and withdrawals.
In contrast, Bithumb manages one cold wallet and one hot wallet per digital asset. Assets deposited into the member’s wallet are immediately transferred to the cold wallet, and if liquidity is insufficient, a manager moves assets to the hot wallet. Thus, hot wallets are only used for withdrawals, while cold wallets handle deposits.
Coinone, Korbit, and Gopax manage wallets by network rather than individual digital assets, operating integrated wallets for multiple digital assets on a single network. For instance, using a postal service analogy, users consider various factors such as fees, delivery dates, and locations, choosing between different courier companies like Korea Post, Lotte, and Hanjin. Similarly, users select appropriate network paths such as Ethereum, Tron, or Polygon for asset transfers.
Coinone and Gopax manage one cold wallet and one hot wallet per network for multiple digital assets, whereas Korbit operates one hot wallet and multiple cold wallets. This method can be more operationally efficient than managing wallets per digital asset. However, if a theft occurs on a wallet managing multiple assets on one network, the damage could be relatively significant.
Exchanges appear to be managing digital asset storage methods autonomously based on their specific circumstances. Given the varying transaction volumes and operational environments across exchanges, a standardized approach to asset storage might be challenging. Nonetheless, since investor protection is paramount and the User Protection Act was implemented ahead of the Basic Law, establishing minimum standards for asset storage methods seems necessary.
An industry insider stated, “Despite exchanges reporting wallet statuses to financial authorities quarterly, maintaining such operational conditions is baffling. As users flock increasingly to major exchanges like Upbit and Bithumb, all exchanges must ensure they can provide reliable asset protection,” reinforcing the need for trust in securely stored assets across all exchanges.
