The Bank of Korea (BOK) has issued a stark regulatory warning, demanding the immediate implementation of financial circuit breakers for cryptocurrency exchanges. This urgent call follows a catastrophic payment error at the Bithumb exchange in early February, where the platform mistakenly distributed 620,000 Bitcoin (BTC) — worth approximately $42 billion at the time — to customers instead of 620,000 Korean won (about $400).
The incident triggered a localized market panic. On Bithumb, the price of Bitcoin plummeted as recipients rushed to sell the erroneously received assets, sparking further panic selling. The exchange halted trading and reversed most transactions within minutes, but not before 1,788 BTC (worth around $125 million) had been sold. Bithumb covered this shortfall using its company reserves.
The central bank's proposal, detailed in a payments report, calls for an automated IT infrastructure capable of real-time verification between an exchange's internal ledger and on-chain blockchain balances. This system would continuously monitor for discrepancies and automatically flag them. Furthermore, the BOK advocates for trading halt mechanisms similar to those used by the traditional Korea Exchange (KRX), which can suspend trading during abnormal order patterns or extreme price volatility.
"Currently, the virtual asset industry lacks internal control mechanisms and faces lower regulatory intensity compared to established financial institutions," the Bank of Korea stated, adding that "as similar incidents could occur at other virtual asset exchanges, it is necessary to strengthen relevant regulations to prevent them in advance."
The proposal is now under review by South Korea's Financial Services Commission (FSC), with industry consultations expected throughout Q2 2025. Major exchanges like Bithumb, Upbit, and Korbit have expressed cautious support, while smaller platforms voice concerns over the substantial infrastructure investment required for compliance.
This move positions South Korea, the world's third-largest crypto market by volume, at the forefront of a balanced regulatory approach, seeking to protect investors and ensure market stability without stifling innovation. The proposed safeguards could serve as a model for other jurisdictions globally.
