South Korea Financial Services Commission orders sector-wide inspections and stronger internal controls after Bithumb erroneous bitcoin payouts

The South Korea Financial Services Commission (FSC) held a meeting with the Korea Financial Intelligence Unit (KoFIU) and the Financial Supervisory Service (FSS) to review Bithumb’s erroneous bitcoin (BTC) payouts on February 6 and to agree measures to strengthen the internal control systems of virtual asset exchange service providers. Following the incident and a sharp drop in BTC price, Bithumb announced plans to compensate users whose sell transactions were affected and to ensure accurate maintenance of BTC user ledgers. The FSC chairman instructed officials to check for any additional user harm, continue monitoring the FSS on-site inspections, and watch for significant virtual asset market movements. An emergency response unit comprising the FSC, KoFIU, FSS and the Digital Asset Exchange Alliance (DAXA) was set up to coordinate user protection, with inspections to be extended beyond Bithumb to all exchange service providers, including checks on distribution controls such as ledger-based cross-verification, multi-step verification and measures to prevent human error. Initial internal control inspections will be led by DAXA, with the FSS conducting on-site inspections based on the industry-level findings. The FSC also indicated it will pursue enhanced internal control standards via pending virtual asset legislation, including establishing a regulatory basis for periodic external reviews of virtual asset holdings and for strict liability where user losses arise from errors in a provider’s data processing system.