South Korean lawmakers are increasing pressure on financial regulators after a system glitch at Bithumb, the country’s largest cryptocurrency exchange, led to the accidental distribution of Bitcoin (BTC) worth more than $43 billion earlier this month.
The February 6 incident has led to political scrutiny of both the exchange itself and the bodies responsible for overseeing the virtual asset market.
Behind Bithumb’s massive Bitcoin crash
According to According to local reporting from The Korea Times, members of the National Assembly are wondering how such a huge mistake could slip through regulators despite repeated inspections.
Representative Kang Min-guk of the main opposition People Power Party announced that the country’s Financial Services Commission (FSC) assessed Bithumb three times between 2022 and 2025.
During the same period, the Financial Supervisory Service (FSS) carried out three separate inspections. Yet regulators failed to detect what is now described as a critical structural weakness in the economy the exchange system.
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Kang argued that existing oversight mechanisms were inadequate. He pointed out that the safeguards were insufficient to prevent a situation where a single employee could initiate mass currency transfers. Kang said:
This episode is not merely a technical mishap, but one that exposes deeper structural weaknesses in the virtual asset market, including complacent supervision and regulatory gaps.
Instead of crediting users Bitcoin worth 2,000 won – approximately $1.38 – the system incorrectly credited 2,000 Bitcoin per user. A total of 620,000 Bitcoins were incorrectly distributed.
Representative Han Chang-min of the small Social Democratic Party also criticized the regulators, questioning whether supervisory authorities had meaningfully evaluated the exchange’s internal systems. “The authorities seemed to pass the buck to Bithumb despite their supervisory role,” Han said.
Broader crypto supervision
In response to the incident, the FSS extended the deadline for its formal investigation from February 13 to the end of the month, citing the need for additional time.
An eight-member inspection team is now intensifying its investigation, focusing on possible violations related to investor protection anti-money laundering (AML) compliance.
Particular attention is paid to the system architecture that allows coins not actually held by the exchange to be credited to users. The regulators have not ruled out the possibility that more incorrect distributions will come to light.
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In addition, financial authorities have reportedly formed an emergency response team in collaboration with the Digital Asset eXchange Alliance (DAXA), a self-regulatory body that domestic exchanges.
The team has begun inspections of asset verification and internal control systems on four other platforms: Upbit, Coinone, Korbit and GOPAX. Any shortcomings are expected to be included in DAXA’s self-regulatory guidelines and could impact the next phase of cryptocurrency legislation in South Korea.
At the time of writing, Bitcoin was trading at $67,763, down 2% in the past seven days and minimal change since Thursday’s trading session.
Featured image from OpenArt, chart from TradingView.com