South Korea tightens crypto rules after Bithumb error

South Korea is tightening crypto regulations after Bithumb's payout error, urging circuit breakers, stricter controls, and warning about API-driven market manipulation.

South Korea's cryptocurrency industry is under increased regulatory scrutiny following recent incidents and official warnings. Major exchanges Bithumb and Coinone failed an internal control inspection by the Financial Supervisory Service, exposing significant weaknesses in governance and risk management. This follows a February incident where Bithumb mistakenly distributed over $40 billion in Bitcoin, causing a sharp, localized price crash. In response, the Bank of Korea and the Financial Services Commission are urging the implementation of circuit breakers and real-time reconciliation systems across all exchanges to prevent market destabilization from operational failures. Recent central bank reports highlight the digital asset sector's lack of internal controls and regulatory oversight compared to traditional finance, calling for stronger regulations under the upcoming Digital Asset Basic Act. Additionally, the Financial Supervisory Service has warned about increasing abuse in the crypto market through APIs, where automated trading programs manipulate transactions and market conditions. A consumer advisory has been issued to raise investor awareness.