South Korean cryptocurrency exchange Bithumb is at the center of two significant developments impacting the local market. First, the exchange has announced a temporary suspension of all deposit and withdrawal services for the Hedera (HBAR) token, effective 9:00 a.m. UTC on March 18, 2025. This measure is a standard operational pause to support a scheduled and substantial Hedera network upgrade, ensuring network stability and safeguarding user assets during the transition. Spot trading for HBAR pairs will remain operational throughout the maintenance, which has no specified end time and will last until the upgrade is complete and Bithumb's systems are verified.
Concurrently, Bithumb faces severe regulatory pressure. The Korea Financial Intelligence Unit (KoFIU) has issued a preliminary notice of a six-month partial business suspension for alleged anti-money laundering (AML) and know-your-customer (KYC) failures. The proposed sanction, which could be finalized as early as March, would primarily restrict new customers from making external crypto transfers, while existing users retain access to Korean won trading and deposits. This action follows a major operational error in February where Bithumb mistakenly credited users with 620,000 Bitcoin, causing a 17% flash crash in BTC/KRW prices and prompting regulator scrutiny.
The regulatory action threatens South Korea's market structure and a key pricing signal. Bithumb is the country's second-largest exchange, commanding 24.8% of won-denominated trading volume as of February, with market leader Upbit holding 58.4%. Together, they control roughly 96% of Korean crypto volume. Constraining Bithumb risks further centralizing activity on Upbit, potentially distorting the "kimchi premium"—the spread between Korean won and global dollar prices for Bitcoin, which is a closely watched gauge of regional retail sentiment. The premium, which has ranged from over 10% to under 1% in recent years, could become a noisier signal, reflecting market access friction as much as genuine demand.
This enforcement is part of a broader regulatory tightening in South Korea ahead of the Financial Action Task Force's 2028 mutual evaluation. Other exchanges like Upbit, Korbit, Coinone, and Gopax have also faced fines or reviews. The dual approach of formalizing crypto infrastructure while enforcing strict compliance creates tension in a highly concentrated market, potentially accelerating capital flight to overseas platforms. The situation is amplified by recent turmoil in traditional Korean financial markets, including a sharp equity selloff and foreign capital outflows.
