Financial Authorities Hold Emergency Meeting on 'Bithumb Mispayment Incident'... "Inspect All Exchanges"

Lee Ok-won Orders "Establishment of Appropriate Internal Controls"

The financial authorities have decided to review the overall internal controls of all virtual asset exchanges in connection with the recent 'Bitcoin mispayment' incident at virtual asset exchange Bithumb.

On February 8, the Financial Services Commission (FSC) held an emergency inspection meeting chaired by FSC Chairman Lee Ok-won with the Korea Financial Intelligence Unit (KoFIU) and the Financial Supervisory Service (FSS) to discuss institutional improvement measures in response to the Bithumb incident. The financial authorities had also held an emergency inspection meeting the previous day to discuss compensation measures for users following the plunge in Bitcoin prices.

Yonhap News

Chairman Lee ordered, "As this incident has exposed structural vulnerabilities in the internal control systems of virtual asset exchanges, conduct a comprehensive inspection of internal controls at all exchanges, not just Bithumb, and establish appropriate internal control frameworks."

He also instructed officials to continuously monitor whether any additional user damage occurs, the progress of the FSS's on-site inspections, and trends in the virtual asset market.

In particular, it was discussed that there is a need to focus inspections on whether virtual asset exchanges have properly established control mechanisms when providing virtual assets to users, including: verification systems between ledgers and held virtual assets, multi-step confirmation procedures, and controls on human error.

Accordingly, centering on the Digital Asset eXchange Alliance (DAXA), the overall internal controls of all exchanges will be reviewed, and based on the results, the FSS plans to conduct on-site inspections.

Fundamentally, the authorities are also pushing to use the second-phase virtual asset legislation to impose on exchanges an obligation to establish internal control standards comparable to those of financial companies.

They also plan to promote measures that would require virtual asset service providers to have their virtual asset holdings periodically inspected by external institutions, and that would stipulate strict liability for virtual asset service providers when user damage occurs due to system failures or other computer-related incidents.