Lawmakers question oversight failures after exchange mistakenly credited 620,000 BTC to users, prompting extended investigation and industry-wide inspections.
South Korean lawmakers are intensifying pressure on financial regulators after a system failure at Bithumb, the country’s largest cryptocurrency exchange, resulted in the accidental distribution of approximately $43 billion worth of Bitcoin earlier this month. The February 6 incident has exposed gaps in regulatory oversight and triggered expanded inspections across the domestic crypto industry .
The error occurred during a promotional event when Bithumb’s system mistakenly credited users with 2,000 Bitcoin each instead of 2,000 Korean won (approximately $1.38). In total, 620,000 Bitcoin that the exchange did not actually hold appeared in customer accounts, briefly sparking attempts to sell the erroneously credited assets .
According to local reporting by The Korea Times, members of the National Assembly are questioning how such a significant failure went undetected despite multiple regulatory reviews. Rep. Kang Min-guk of the main opposition People Power Party disclosed that the Financial Services Commission (FSC) conducted three inspections of Bithumb between 2022 and 2025, while the Financial Supervisory Service (FSS) performed three separate examinations during the same period. None identified what regulators now describe as critical structural weaknesses in the exchange’s systems .
“The episode is not merely a technical mishap but a case that lays bare deeper structural weaknesses in the virtual asset market, including complacent supervision and gaps in regulation,” Kang said during parliamentary proceedings .
Bithumb CEO Lee Jae-won acknowledged during an emergency National Assembly session on February 11 that two similar but smaller incidents had occurred previously, with the miscredited amounts recovered. In the current case, the exchange reported recovering the majority of assets, with approximately 125 Bitcoin — valued at $8.6 million — remaining unrecovered .
The FSS extended its formal investigation deadline from February 13 to the end of the month, citing the need for additional review. An eight-member inspection team is now examining possible violations related to investor protection and anti-money laundering compliance, with particular focus on the system architecture that allowed coins not held by the exchange to be credited to users .
Financial authorities have formed an emergency response team in coordination with the Digital Asset eXchange Alliance (DAXA), a self-regulatory body representing domestic exchanges. The team has begun inspecting asset verification and internal control systems at four other platforms — Upbit, Coinone, Korbit, and GOPAX .
The Bithumb incident coincides with renewed scrutiny of authorities’ handling of digital assets. In 2021, 22 Bitcoin disappeared from a cold wallet at Seoul’s Gangnam Police Station during a nationwide audit. A separate August 2025 case saw 320 Bitcoin vanish from the Gwangju District Prosecutors’ Office due to a leaked password. Authorities disclosed this week that the full amount had been recovered after the hacker returned the funds, though the timing of the announcement during the Bithumb investigation has raised questions .
Why this matters: The incident shifts the regulatory landscape in South Korea by exposing oversight failures despite multiple inspections, potentially accelerating legislative changes and strengthening enforcement across all domestic exchanges. From a market structure perspective, the coordinated industry-wide inspections and potential incorporation of findings into DAXA’s self-regulatory guidelines could raise compliance costs and operational requirements for all platforms operating in the jurisdiction. The political backlash also increases the likelihood that South Korea’s next phase of cryptocurrency legislation will include stricter system architecture and internal control mandates .
Source: NewsBTC via ADVFN