South Korean financial authorities are facing intense scrutiny after a catastrophic error at cryptocurrency exchange Bithumb exposed severe weaknesses in both the exchange's internal controls and regulatory oversight. The incident, which occurred on February 6, involved a promotional event where a single employee mistakenly credited 249 users with 2,000 BTC each instead of coins worth 2,000 Korean won (approximately $1.38). This resulted in the system registering a distribution of 620,000 bitcoins, valued at roughly $40 billion, far exceeding Bithumb's actual holdings of about 42,800 BTC.
The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) had conducted multiple inspections of Bithumb—once in 2022 and twice in 2025 by the FSC, and three times by the FSS—yet failed to identify critical discrepancies between the exchange's actual holdings and its accounting records. Lawmakers, including Rep. Kang Min-guk and Rep. Han Chang-min, have criticized these inspections as largely procedural and indicative of deeper systemic failures in ledger management and supervision.
In response, the FSS has extended its formal investigation into Bithumb through the end of February, examining potential violations related to investor protection, anti-money laundering (AML), and system security. The probe will also review two smaller prior errors acknowledged by Bithumb CEO Lee Jae-won. Concurrently, an emergency team from authorities and the Digital Asset eXchange Alliance (DAXA) is conducting asset verification and internal control reviews at other major South Korean exchanges, including Upbit, Coinone, Korbit, and GOPAX.
The political fallout is significant. The ruling Democratic Party's Digital Asset Taskforce, chaired by Lee Jung-moon, is preparing to introduce a package of stringent new regulations. These rules, expected to be finalized by the end of the month, will treat crypto exchanges as integral parts of the financial infrastructure, mirroring standards in traditional finance. Proposed measures include stricter licensing requirements, enhanced internal control systems, multi-signature transfers, cooling-off periods for large transactions, and mandates for exchanges to hold larger financial reserves to cover potential losses from hacks or errors.
This regulatory push comes at a sensitive time for Bithumb, which is aiming to become the first South Korean crypto exchange to go public in the United States this year. The incident also follows a recent $36 million hack at rival exchange Upbit, compounding pressure on the domestic industry. The results of the ongoing investigations are expected to directly influence both DAXA's self-regulatory framework and future national cryptocurrency legislation.
