The South Korean central bank has called for cryptocurrency exchanges to implement their own “circuit breakers” to pause trading and prevent market panic after a clerical error at Bithumb led to the accidental transfer of $42 billion in Bitcoin to its customers.
Summary
- The Bank of Korea is urging the government to mandate trading curbs on cryptocurrency platforms to prevent market destabilization caused by operational failures.
- The central bank reports that the lack of internal controls led to a February incident where Bithumb accidentally distributed $42 billion in Bitcoin due to a clerical error.
- New regulatory proposals suggest that exchanges should implement automated systems to detect human mistakes and verify internal asset balances against the blockchain in real time.
The Bank of Korea (BOK) stated in a payments report released Monday that officials should adopt trading curbs modeled after the Korea Exchange to freeze activity during sudden price swings.
This recommendation follows a massive clerical error in February, where Bithumb, one of the country’s largest platforms, accidentally distributed over $40 billion in Bitcoin to its users.
The central bank highlighted a significant gap in oversight between digital asset platforms and traditional finance. “Currently, the virtual asset industry lacks internal control mechanisms and faces lower regulatory intensity compared to established financial institutions,” the BOK noted.
Officials argued that new rules are essential to prevent a repeat of recent disruptions, stating, “Consequently, as similar incidents could occur at other virtual asset exchanges, it is necessary to strengthen relevant regulations to prevent them in advance.”
The proposal arrives as South Korean legislators work on a new regulatory framework for the industry. The BOK urged that these specific safety measures be woven into the upcoming laws “to enhance the safety and transparency of virtual asset exchange operations.”
The Bithumb incident
The push for reform stems from an early February event where Bithumb mistakenly sent out 620,000 Bitcoin—valued at roughly $42 billion at the time—to customers. The error occurred when the system processed a transfer as cryptocurrency instead of the intended 620,000 Korean won, a sum worth only about $400.
The massive influx of coins triggered an immediate market crash on the platform. As recipients began selling their windfall, other investors panicked, further dragging down the price.
While Bithumb managed to halt trading and reverse most of the transfers within minutes, 1,788 BTC had already been liquidated. The exchange had to use its own corporate reserves to cover the resulting $125 million shortfall.
To mitigate such risks, the central bank suggested that platforms must deploy systems specifically designed to catch “erroneous payments caused by human error.”
The report also recommended a requirement for exchanges to run automated checks that sync internal records with blockchain data to immediately spot any asset discrepancies.
Source: https://crypto.news/south-korea-pushes-for-crypto-circuit-breakers-after-bithumb-transfer-error/
