Upbit Moves 99% Assets to Cold Wallets Following $30M Hack

Upbit, South Korea's largest crypto exchange, plans to move over 99% of customer assets into cold wallets following a breach of its Solana hot wallets in November.

Dunamu, Upbit's parent company, announced the decision on December 10.
This move aligns with South Korea’s Virtual Asset User Protection Act, which mandates holding at least 80% of digital assets in cold storage.
Upbit had already stored 98.33% of its assets in cold wallets but aims to reduce hot wallet holdings to below 1% after losing 44.5 billion KRW ($31 million) to hackers.
The exchange froze $1.77 million of stolen funds using its Automatic Tracking Service; however, the rest is likely lost.
Upbit assures that it will cover all losses from its reserves and that user funds remain safe.

Security Implications

Upbit's actions may set new security standards for other exchanges to improve their own cold/hot wallet ratios.
While this reduces potential hacking risks, it might lower liquidity, causing delays in large withdrawals during volatile periods.
Withdrawal delays could increase the "Kimchi premium," as seen when Upbit paused withdrawals post-hack, affecting price disparities with global markets.

Upbit leads the Korean market with a daily trading volume exceeding $1.3 billion, supporting 301 different tokens. Liquidity issues could significantly affect smaller market cap tokens like MEW, valued at $102 million.