Crypto regulations in South Korea are set to become stronger in its oversight following a $40bn Bitcoin blunder by Bithumb.
Bithumb, a South Korean crypto exchange, revealed an internal error resulted in approximately $40bn worth of Bitcoin being mistakenly distributed to customers as rewards, prompting regulators to call for tighter industry controls.
In a statement issued on February 8, Bithumb said it had implemented a “special countermeasure” to recover the funds, supported by an internal investor damage relief team. The company initially planned to reward customers 2,000 Korean Won ($1.40) each, but instead, accidentally sent 2,000 BTC.
The company stated that while no direct customer asset losses have occurred, some transactions were completed under unfavourable conditions due to Bitcoin’s price decline in recent weeks.
Bithumb added that it will fully compensate customers for any asset losses linked to the incident. The exchange also confirmed it has introduced enhanced safeguards, including manual asset verification, event-based payment checks, and two-factor authentication for asset transfers and reward distributions.
“I feel a heavy responsibility for this accident,” said Lee Jae-won, CEO of Bithumb. “We will build a safer trading environment with customer trust and peace of mind rather than external growth.”
The company ensured customers this was not due to a hacking breach or security failures.
New security measures
Although Bithumb said it recovered 99.7% of the mistakenly distributed Bitcoin by freezing customer accounts, a small portion of the funds remains unrecovered after some users immediately withdrew the assets.
Under South Korean law, if funds – including virtual assets – are mistakenly credited to a customer’s account and are not returned or are withdrawn, the Supreme Court allows for prosecution under embezzlement statutes.
According to South Korean outlet PennMike, Bithumb has begun contacting affected customers to request the return of the Bitcoin at its sale price, arguing to authorities that it is entitled to reclaim the assets through an “unfair return claim” lawsuit.
The incident has also prompted a regulatory response. South Korea’s Financial Services Commission (FSC) announced plans to introduce enhanced supervisory measures under existing crypto regulations, aimed at enabling faster intervention in cases of suspicious digital asset activity.
An FSC annual policy work plan released on February 9 outlined new safeguards, including accelerated detection and response mechanisms for suspicious trading and market manipulation. In addition, the regulator plans to mandate that crypto firms carry insurance to cover liabilities arising from fraud or network failures, and maintain robust surveillance systems to monitor and flag suspicious transactions.
Crypto regulations in South Korea
After the collapse of TerraLuna in May 2022, which effectively sparked a global crypto market downturn, South Korea’s FSC introduced the first regulations of its crypto and digital asset markets.
The Virtual Asset User Protection Act was implemented in July 2024 to primarily protect investors and their assets. There are also safeguard provisions for investors to protect them from potential fraudulent activity and price manipulation.
The Act mandates crypto exchanges, which are classified as Virtual Asset Service Providers (VASPs), to keep customer deposits held in banks and to pay customers interest on payments for deposits.
The FSC also requires VASPs to keep customer virtual assets separate from their virtual assets reserves, ensuring that their reserves match or exceed that of the customer.
