[Editorial] Shock Over Bithumb’s Erroneous Payouts Shows Need to Greatly Strengthen Crypto Stability

The Financial Supervisory Service (FSS) is working on measures to address the structural vulnerabilities in the cryptocurrency market exposed by the Bithumb incident. On the 9th, FSS Governor Chan-Jin Lee said the agency is confronting the problems of crypto assets revealed by system design flaws and is preparing for effective implementation of the second-phase crypto legislation to protect market users. This is a strong response following the incident on the 6th, when 620,000 so-called "ghost Bitcoins," worth about 63 trillion won at market prices, were wrongly credited at Bithumb.
The FSS’s response to the cryptocurrency market is timely, and its intensity is expected to be higher than in the past. Stakeholders linked to crypto assets may be disadvantaged in the short term. However, in the long run, decisive action now could prove beneficial for the future of the crypto market.
This incident is deeply shocking. Who can accept that a volume of Bitcoin more than 14 times Bithumb’s actual holdings was created on the books and traded? It clearly exposes a gaping hole in the exchange’s internal control system. The case shows that a prize of 620,000 won could somehow morph into 620,000 Bitcoin.
It cannot be dismissed as a simple employee mistake, because the sums involved are enormous. If a single staff error can trigger losses of this magnitude, the only conclusion is that the regulatory framework must be tightened further. During Bithumb’s erroneous payout process, no safety mechanism appears to have worked. The surge in distrust toward crypto assets is another serious problem. At a time when they are trying to establish themselves as a new means of transaction, such an incident is likely to complicate future legislation.
After a major incident, the task is to reinforce the system so that it cannot happen again. As a first step, authorities must investigate conditions across all exchanges. If this problem occurred at Bithumb, similar vulnerabilities may exist elsewhere. Every exchange needs to undergo thorough scrutiny.
This case has revealed just how lax internal control and management are at cryptocurrency exchanges. It also shows that financial authorities have been complacent in overseeing on-the-ground operations and internal systems at these platforms. To restore trust in the crypto market, regulators must conduct a rigorous investigation.
At the same time, the second-phase crypto legislation must be prepared with great care. As this incident has shown, weak rules on internal controls for managing crypto assets will only fuel uncertainty in the market. It should be taken as a hard lesson. The law must mandate strong internal control standards and require robust systems for reconciling books with actual assets, as well as mechanisms to prevent human error.
Of course, excessive regulation of crypto assets must be avoided. Authorities should not stifle a market whose trading volume is growing by the day and which is already global in scope. The framework should promote market development while ensuring stability. What is needed is the wisdom to build a regulatory system that is airtight yet still flexible.