South Korea tightens crypto oversight after Bithumb payout error spooks regulators

The fastest way to shake confidence in a trading venue is to make its ledger look uncertain. South Korean officials say that is the lesson from Bithumb’s recent payout mistake.

On Feb. 8, the Financial Services Commission said it convened an emergency meeting with the Korea Financial Intelligence Unit and the Financial Supervisory Service to review the incident and map out improvement measures for exchange controls. The regulator said Bithumb has promised compensation for users whose sell orders were affected and said it is checking that customer bitcoin balances are being recorded accurately.

Authorities also set up a response unit that includes the FSC, KoFIU, FSS and DAXA, an industry body of local exchanges, and directed inspections across Bithumb and other platforms. A key focus is the plumbing behind customer distributions: cross-verification against ledgers, multi-step verification, and safeguards that reduce human error. Regulators want the follow-through to land in law. The FSC said it will seek to apply internal control standards for exchanges at a level comparable to those used for traditional financial firms through pending virtual asset legislation. The same package would introduce a periodic external review of exchanges’ virtual asset holdings and set strict liability for user losses tied to errors in data processing systems. 

The push comes as the head of the Financial Supervisory Service warned that recent events exposed structural vulnerabilities in crypto platforms’ electronic systems. The FSS governor said authorities are looking closely at those weaknesses as virtual assets are pulled further into the mainstream financial system. 

A parallel track is tightening anti-money laundering rules. On Feb. 5, KoFIU said it plans to expand the travel rule to cover transfers below the current 1 million won threshold and to apply stronger requirements around transactions involving personal wallets and overseas service providers. For Korean exchanges, the message is clear: regulators are treating operational resilience as a core part of user protection, and the era of light-touch internal controls is ending.