On February 9, Lee Chan-jin, Governor of the Financial Supervisory Service (FSS), publicly expressed serious concern regarding the recent Bithumb erroneous transfer incident, describing it as a “disaster-level risk.” Regulators have initiated a large-scale investigation into “off-book trading” practices across virtual asset exchanges to assess potential systemic risks within the industry.
Lee emphasized that if illegal activities or major negligence are confirmed, authorities will impose administrative measures under existing laws.
Massive Transfer Scale Exposes Structural Weaknesses in Exchange Operations
According to disclosures, the erroneous transfer involved approximately 620,000 BTC, exceeding the platform’s actual holdings by more than 14 times, raising concerns over internal accounting and transaction structures.
Regulators identified potential deficiencies including:
- Lack of mechanisms preventing transfers of non-existent assets
- Insufficient internal clearing system risk controls
- Disconnection between off-book trading records and real asset reserves
- Possible gaps in risk verification procedures
Authorities have already conducted on-site inspections and plan to escalate the review into a formal investigative process.
Digital Asset Basic Act May Strengthen Licensing and Enforcement Powers
Lee also noted that once the Digital Asset Basic Act is enacted, regulators will gain expanded authority, including:
- Restricting or revoking exchange operating licenses
- Enhancing internal control and auditing requirements
- Increasing capital reserves and proof-of-reserve obligations
- Strengthening executive accountability frameworks
Industry observers believe the incident may become a turning point in the evolution of Korea’s virtual asset regulatory framework.
Industry Warning: Operational Transparency Becomes Core Regulatory Focus
In recent years, Korean regulators have expanded oversight from AML compliance and investor protection toward internal accounting practices and asset authenticity verification.
As institutional capital enters the crypto market, regulators are expected to impose stricter requirements on proof of reserves, operational transparency, and risk control frameworks.
Exchanges may need to enhance:
- Real-time asset verification systems
- On-chain reconciliation processes
- Abnormal transaction monitoring mechanisms
These measures aim to reduce systemic operational risks within trading platforms.
Rising Importance of On-Chain Monitoring and Risk Control Tools
With increasing exchange scale and regulatory pressure, on-chain risk identification and fund flow monitoring are becoming essential infrastructure. Through tools such as Trustformer KYT, platforms can track asset movements in real time, detect abnormal behaviors, and strengthen internal risk management and compliance frameworks.
Conclusion
The Bithumb erroneous transfer incident not only exposed internal risk control vulnerabilities within exchanges but also accelerated regulatory upgrades in Korea’s virtual asset sector. As legal frameworks evolve and enforcement powers expand, operational transparency and asset security management are expected to become central requirements for future exchange development.