Chairman Lee Eog-weon of the Financial Services Commission convened a meeting with officials from the Korea Financial Intelligence Unit (KoFIU) and the Financial Supervisory Service (FSS) on February 8 to review situations concerning erroneous payouts of bitcoins (BTC) by Bithumb, which took place on the evening of February 6, and to discuss measures to strengthen the internal control system of virtual asset exchange service providers.
Current Situation
In the wake of accidental payouts of bitcoins (BTC) by Bithumb, which took place around 19:00 on February 6, an emergency meeting was held where the authorities discussed the issue of providing compensations for users following a sharp drop seen in the price of bitcoin (BTC).
In this regard, Bithumb announced its own plans to offer compensations for its platform users whose sell transactions were affected by the accident and to make sure that its BTC users’ ledger is being maintained accurately.
At today’s meeting, FSC Chairman Lee instructed officials to check whether there are any further damages to users and to continue to monitor the progress of on-site inspections performed by the FSS and any significant movements in the virtual asset market.
Government Response
In response to Bithumb’s erroneous payouts, an emergency response unit was set up at yesterday’s meeting, consisting of officials from the FSC, KoFIU, FSS, and DAXA (Digital Asset Exchange Alliance), to make sure that necessary steps are taken to protect the users of virtual assets. As such, at today’s meeting, the authorities discussed ways bring about regulatory and structural improvements to strengthen the reliability and transparency of virtual asset exchange service providers.
In response to the recently exposed vulnerability in the internal control system of virtual asset exchange service providers, FSC Chairman Lee instructed officials to conduct inspections on Bithumb and all other virtual asset exchange service providers and to make sure that they are equipped with proper internal control measures. Particularly concerning the process of distributing virtual assets to users, officials discussed the need to inspect whether virtual asset exchange service providers are sufficiently equipped with a properly controlled cross-verification system based on a ledger, a multiple-verification process, and measures to prevent human error.
Accordingly, there will be inspections carried out on the internal control system of virtual asset exchange service providers led by the DAXA at first, and the FSS will conduct on-site inspections based on the result of initial industry-level inspections. Additionally, the FSC will seek to require an enhanced level of internal control standards from virtual asset exchange service providers, an equivalent level currently applied on financial companies, through the pending legislation on virtual assets.
The pending legislation on virtual assets will also include measures to strengthen credibility and protection for users. In this regard, there will be a regulatory ground established to make virtual asset service providers subject to a periodic review of virtual asset holdings carried out by an external expert group. There will also be a regulatory ground established to make virtual asset service providers strictly liable for the losses and damages incurred to users resulting from an error or mistake exhibited in their data processing system.
* Please refer to the attached PDF for details.