South Korea to Upgrade Fraud Refund System Ahead of Crypto Asset Coverage

South Korea’s Financial Supervisory Service (FSS) is upgrading its financial fraud compensation system ahead of a new rule allowing victims of voice phishing and other financial scams involving cryptocurrency to receive refunds.

The FSS announced the system improvement project on August 6, ahead of amendments to the Telecommunications Financial Fraud Refund Act taking effect on October 1, 2026. The revised law expands eligible assets to include cryptocurrency, addressing cases where fraudsters convert stolen funds into digital assets or directly take cryptocurrency from victims.

Under the current system, victims apply for compensation through their financial institutions, which request the FSS to calculate the amount eligible for refund. The financial institution then pays victims based on the FSS’s calculation.

The upgraded system will expand the calculation process beyond Korean won to cover the type and amount of cryptocurrency involved, as well as its won value at the time transactions are suspended. The FSS will also redesign its calculation logic to handle complex transactions in which stolen funds are split across multiple accounts, mixed with other victims’ funds and later consolidated.

The regulator said the revised system will enable more comprehensive analysis of complicated fund flows and improve the allocation of remaining assets among individual victims.

The FSS also plans to calculate refund amounts in advance through batch processing rather than generating them each time an employee accesses a case, reducing processing time. Electronic notifications to victims will include cryptocurrency details such as the asset type, amount and its converted value when payments were suspended.

The system upgrade is scheduled from September to November, with a budget of KRW 118.53 million (around US$81,000). Although the amended law takes effect in October, the FSS said the additional development period is intended to address potential system failures and further improvements after implementation.