Operational mistake at major exchange intensifies debate over supervision, custody standards and governance in South Korea’s digital asset market.
South Korean lawmakers are pushing for tighter oversight of the country’s cryptocurrency industry after a major operational error at Bithumb exposed weaknesses in internal controls and regulatory supervision. The incident occurred on Feb. 6 during a promotional event, when the exchange mistakenly credited users with 2,000 Bitcoin each instead of 2,000 Korean won (about $1.40).
The error resulted in 620,000 Bitcoin being recorded in customer accounts — assets the exchange did not actually hold. Although Bithumb said the issue was corrected within minutes and largely limited to internal ledgers, some users attempted to sell the miscredited Bitcoin, briefly distorting prices on the platform. Industry estimates placed the notional value of the mistaken credit at around $43 billion before adjustments were made.
In response, the Financial Services Commission (FSC) launched a formal probe on Feb. 10, stating it would take “stern legal actions against acts that harm market order.” The investigation, initially expected to conclude within days, has since been extended to the end of February. The Financial Supervisory Service (FSS), which conducts supervisory inspections, is also reviewing the case.
The extension has drawn attention because regulators had previously inspected Bithumb multiple times since 2022 without identifying the structural input flaw that led to the miscredit. Lawmakers say the episode raises questions not only about exchange controls but also about the depth and frequency of regulatory audits.
Lawmakers Criticize Oversight Gaps
Representative Kang Min-guk of the People Power Party described the event as more than a technical glitch.
“The episode is not merely a technical mishap but a case that lays bare deeper structural weaknesses in the virtual asset market, including complacent supervision and gaps in regulation,” Kang said during a parliamentary session.
Another lawmaker criticized regulators for appearing to shift responsibility entirely onto the exchange, despite their supervisory role. The criticism highlights growing political pressure to strengthen oversight as digital assets become more embedded in South Korea’s financial system.
Recovery Efforts and Prior Incidents
Bithumb said it recovered approximately 99.7% of the incorrectly credited Bitcoin. However, around 125 Bitcoin — valued at roughly $8.6 million — remained unrecovered and had to be covered using company funds. Chief Executive Lee Jae-won told the National Assembly that two smaller payout errors had occurred in the past, though those were resolved quickly and involved limited amounts. Regulators confirmed that those previous cases are now part of the broader investigation.
The episode has also revived concerns about digital asset custody practices. In recent years, separate incidents involving missing Bitcoin from law enforcement-managed wallets raised questions about password security and internal asset controls. While those cases were eventually resolved, they contributed to a perception of systemic vulnerabilities.
Governance and Legislative Response
Beyond the immediate investigation, the FSC has proposed additional governance measures as part of the forthcoming Digital Asset Basic Act. One proposal would limit the ownership stakes of major shareholders in domestic crypto exchanges in an effort to strengthen accountability and corporate governance.
Lawmakers and industry observers say the Bithumb case could influence how the government enforces compliance standards, including:
- Stricter internal control requirements for exchanges
- More frequent system audits and stress testing
- Clearer custody and asset segregation rules
- Enhanced supervisory coordination between agencies
These measures are likely to be debated in the coming months as regulators seek to balance investor protection with market development.
Broader Implications for Korea’s Crypto Market
South Korea is one of the world’s most active retail cryptocurrency markets, with millions of users trading on domestic platforms. At the same time, institutional interest in the sector has been rising, with traditional financial firms exploring stakes in digital asset businesses.
The Bithumb incident therefore arrives at a sensitive moment. While the technical error was corrected quickly and most assets were recovered, lawmakers argue that the scale of the miscredit — even if largely notional — revealed potential weaknesses in oversight architecture.
The outcome of the FSC’s extended investigation is expected to shape the next phase of crypto regulation in South Korea, setting the tone for how authorities address operational risk, governance standards and investor protection in a rapidly evolving digital asset ecosystem.
