South Korea to tighten crypto rules after Bithumb case

South Korean financial authorities are moving to regulate crypto exchanges more strictly following a recent incident at Bithumb involving a wrongful bitcoin payment worth around 62 trillion won (US$42.7 million).

During a National Policy Committee session on February 11, vice chairman Kwon Dae-young said that internal control standards will be incorporated into upcoming legislation, aiming to make them binding.

The Financial Supervisory Service highlighted that current laws lack specific requirements for internal controls and risk management, emphasizing the need for real-time systems to verify virtual asset holdings.

Bithumb’s CEO, Lee Jae-won, confirmed the exchange complies with existing laws and is preparing for potential new regulations.

The government plans to introduce additional measures, such as mandatory external audits of virtual asset holdings and strict liability for damages caused by system failures, as part of the second-stage Digital Asset Basic Act, which aims to cover areas not addressed by current laws.

🔗 Source: Chosunbiz

🧠 Food for thought

Implications, context, and why it matters.

The Bithumb incident exposed a hole in internal control rules

The payment error was large; a glitch credited users with 2,000 bitcoin instead of a planned 2,000 won promotion, triggering a price drop of up to 17% on the exchange, according to one report 1.
Bithumb clawed back 99.7% of the assets, yet the regulator’s probe summary in the same report linked the episode to blind spots between financial-crime rules and day-to-day exchange reliability 1.
South Korea’s Virtual Asset User Protection Act took effect in 2024 and set market-conduct bans such as insider trading and market manipulation; separate rules also impose anti-money laundering requirements on virtual asset service providers 2.
The episode suggested those frameworks did not fully cover internal IT controls or operational risk, including real-time checks of virtual asset holdings and enforceable internal control standards; the proposed second-stage Digital Asset Basic Act aims to fill those gaps.

Tighter guardrails could slow the institutional crypto rollout

New internal control obligations add weight to a regulatory posture described as “defensive,” where anything not explicitly permitted is prohibited 3.
The added workload may push smaller firms to merge or exit; Upbit has rolled out safeguards such as a proof-of-reserves system (a method for an exchange to demonstrate it holds customer assets), according to one report 1.
The stability drive lands as regulators discuss wider institutional access, including corporate participation and possible spot bitcoin ETF (exchange-traded fund)-related reforms in 2025–2026 2.
The Bithumb mistake may harden a cautious approach, which could delay a shift from a retail-led market to broader institutional participation.