South Korea’s financial regulator has said that local cryptocurrency exchange Bithumb’s accidental giveaway of more than US$40 billion in bitcoin to customers highlights the need for stronger rules to address vulnerabilities in digital assets.
The exchange said on February 7 it had unintentionally distributed the bitcoin as promotional rewards, prompting a sharp selloff, Reuters reported.
Lee Chan-jin, Governor of the Financial Supervisory Service (FSS), told a press conference that regulatory mechanisms must be improved to manage such risks.
“It is a case that shows the structural problems of electronic systems for virtual assets. There are many areas we are seriously looking into, and we are particularly worried about the issue of electronic systems,”
he said.
“There are tasks to significantly improve the regulatory system, as virtual assets are in the process of being brought into the legacy financial system,”
Lee added.
South Korea introduced the Virtual Asset User Protection Act in July 2024 to better safeguard crypto investors following a market rout in 2022 triggered by the collapse of terraUSD and luna.
Authorities are planning further legislation to expand oversight of digital assets, while discussions continue on won-denominated stablecoins.
A market analyst, speaking anonymously, said the incident ‘regrettable… because financial firms were trying to foster the industry through M&A deals, expecting more policy support, which the incident will now delay.’
Bithumb retrieved 99.7% of the 620,000 bitcoins it gave away on Friday, according to initial investigations by financial authorities.
The exchange also recovered 93% of the 1,786 bitcoins sold before it suspended transactions.
Lee noted that authorities must resolve the issue of “ghost coins” before treating cryptocurrencies as conventional financial assets.
The regulator requires anyone who sold the mistakenly distributed bitcoins to return them.
On plans to introduce spot bitcoin exchange-traded products, Lee said he would adopt a cautious approach, emphasising that authorities must ensure stability before classifying them as legacy financial assets.
Featured image credit: Edited by Fintech News Hong Kong, based on image by freepik
