Following a major Bitcoin payout error, the Bank of Korea emphasizes the need for enhanced oversight and regulatory measures in the digital asset market.
Category: Business
SEOUL — The Bank of Korea (BOK) has urged the introduction of circuit breaker systems in domestic cryptocurrency exchanges, similar to those used in traditional stock markets, to prevent incidents like the recent Bitcoin payout error at Bithumb, one of South Korea's largest exchanges. This recommendation came in the BOK's "2025 Payment Settlement Report," released on April 13, following the February 6 incident where an employee mistakenly issued 620,000 Bitcoins, valued at approximately 60 trillion won ($45 billion), instead of a mere 620,000 won ($470).
Immediately after the erroneous payout, some customers began selling the excess Bitcoins, causing the price to plummet from 98 million won ($73,800) to 81 million won ($61,000). This sharp decline resulted in panic selling and automatic liquidation of Bitcoin collateral loans, leading to substantial losses for many investors.
The BOK identified the lack of internal controls as a primary cause of the incident. According to the report, there were no checks in place that required supervisory approval or verification from internal audit departments before substantial asset transfers could occur. The internal ledger was only reconciled with the actual blockchain wallet balances once a day, which contributed to a delay of about 40 minutes in recognizing and responding to the error.
During this time, the exchange's fraud detection system, known as the FDS, failed to operate effectively, exacerbating the situation. In light of these failures, the BOK emphasized the necessity for a dual verification system to prevent input errors and a real-time automated balance verification IT system to mitigate human mistakes.
The call for a circuit breaker system is particularly pertinent as it would allow for temporary trading halts during extreme price fluctuations, similar to mechanisms already in place on the Korea Exchange, which suspends trading for 20 minutes if the KOSPI or KOSDAQ indices drop more than 8% within a minute.
In addition to the circuit breaker proposal, the BOK has also raised concerns about the volatility of stablecoins in the market. Following the announcement of new tariffs on China by former U.S. President Donald Trump on October 11, 2022, the prices of stablecoins surged dramatically, with the value of USD1 reaching 10,000 won ($7.50) on domestic exchanges like Upbit and Bithumb, and USDT skyrocketing to 5,750 won ($4.30).
The BOK explained that as major cryptocurrencies plummeted in value, there was an increased demand for stablecoins as a safer alternative. This demand was fueled by the need to buy stablecoins as a substitute for the dollar, leading to additional price spikes.
In its report, the BOK underscored the need for stricter regulations on excessive leverage and lending practices by exchanges, which could undermine the financial stability of households and institutions. The rapid increase in cryptocurrency investors, which surged to approximately 21.6 million by the end of last year, has raised alarms about the potential risks in the market.
Last year alone, the number of domestic cryptocurrency investors grew by 3.1 million, highlighting the growing interest in digital assets. This rise in participation coincided with a dramatic decrease in average daily trading volume, which fell from 11.8 trillion won ($8.8 billion) at the beginning of 2025 to just 2.7 trillion won ($2 billion) by year-end, a staggering 77% decline. Similarly, the total value of cryptocurrency holdings plummeted from 121.8 trillion won ($91 billion) to 81.7 trillion won ($61 billion), a decrease of about 33%.
Conversely, the amount of stablecoin holdings increased significantly, from approximately 280 billion won ($210 million) at the beginning of the year to 871.9 billion won ($650 million) by the end of the year, marking a 3.1-fold increase. This surge was attributed to a preference for safer assets following the downturn in cryptocurrency prices.
The BOK reiterated that the fluctuations in stablecoin values could serve as a conduit for global shocks to affect the domestic market, emphasizing the importance of regulatory measures to manage excessive leverage and lending activities by exchanges.
As the cryptocurrency market continues to evolve, the BOK's recommendations aim to bolster the safety and transparency of digital asset transactions in South Korea. The proposed circuit breaker system, along with enhanced internal controls and regulatory oversight, seeks to protect investors and stabilize the market.
In light of these developments, the BOK is advocating for the incorporation of these regulatory measures into the upcoming Digital Asset Basic Law, which is currently under discussion by the government and the National Assembly (South Korea's parliament). The implementation of these recommendations is seen as a necessary step toward safeguarding the growing number of cryptocurrency investors in the country.
With the rise of digital assets, the BOK's focus on regulatory frameworks highlights the delicate balance between fostering innovation in financial technology and ensuring the stability of the financial system. As discussions progress, stakeholders in the cryptocurrency sector will be closely watching how these proposed changes will shape the future of digital asset trading in South Korea.