Tom Kushner Lawmakers intensify criticism of South Korea’s financial watchdog after the Bithumb Bitcoin error exposes regulatory flaws and delayed investigations in the country’s crypto oversight.
Bithumb Bitcoin error ignites political and market storm in South Korea
South Korea’s financial authorities are facing a fresh storm of criticism after the Bithumb Bitcoin error caused widespread market confusion and sparked an urgent political response. The country’s Financial Services Commission (FSC) has come under fire from lawmakers who accuse it of negligence and poor supervision of one of South Korea’s largest crypto exchanges.
The controversy erupted when Bithumb mistakenly credited its users with 620,000 Bitcoin instead of 2,000 Korean won during a promotional campaign. The blunder briefly inflated customer balances and triggered a flurry of trading activity before the exchange froze accounts to contain the fallout. Lawmakers now say the Bithumb Bitcoin error exposes long-standing weaknesses in South Korea’s digital asset regulation.
Members of the National Assembly have openly criticized the FSC for failing to detect vulnerabilities in Bithumb’s systems despite multiple inspections over the past two years. Representative Kang Min-guk of the opposition People Power Party described the Bithumb Bitcoin error as a symptom of structural problems in the crypto market. He argued that the regulator’s repeated audits since 2022 failed to identify the operational flaws that ultimately led to the incident.
According to local media reports, the Bithumb Bitcoin error was more than a mere technical mistake. It revealed inconsistencies in how exchanges handle promotional credits and internal accounting, raising questions about transparency and compliance. Lawmakers have urged the FSC to take immediate corrective measures to restore investor confidence and prevent a recurrence.
Probe delays fuel public frustration
The FSC launched an official investigation into the Bithumb Bitcoin error on February 10, promising swift and firm action. However, what began as a short-term inspection has now stretched into weeks, deepening public frustration. Officials initially expected to wrap up the probe by mid-February but have since postponed completion until the end of the month, citing the need for additional review.
The delay has only intensified scrutiny of the regulator. Critics argue that the FSC’s slow response undermines confidence in the country’s ability to manage crypto-related crises. “Each day the investigation lingers, public trust erodes further,” said one industry observer quoted by local outlets. The prolonged process has fueled speculation that regulators may be grappling with broader issues beyond the Bithumb Bitcoin error itself, including potential lapses in cybersecurity and exchange governance.
Exchange acknowledges prior payout glitches
During an emergency session of the National Assembly, Bithumb CEO Lee Jae-won admitted that the company had experienced two previous cases of accidental payouts, though those were reportedly minor and swiftly resolved. This revelation has added fuel to the ongoing debate over how exchanges manage user funds and safeguard against systemic errors.
In the latest incident, Bithumb successfully recovered nearly all of the erroneously distributed Bitcoin, but roughly 125 BTC valued at more than 8 million dollars remains unrecovered. The partial loss, while small compared to the total, has nonetheless amplified public concern over how digital assets are tracked and reconciled across the exchange’s internal systems. The Bithumb Bitcoin error, analysts say, may serve as a wake-up call for both regulators and trading platforms across Asia.
Past blunders haunt South Korea’s crypto oversight
The fallout from the Bithumb Bitcoin error comes at a time when South Korea’s handling of digital asset security is already under intense scrutiny. In a 2021 case, authorities lost access to Bitcoin seized during a criminal investigation after 22 BTC vanished from a cold wallet stored at the Gangnam Police Station. More recently, in 2025, 320 BTC disappeared from the Gwangju District Prosecutors’ Office following a password leak, though the funds were later recovered.
These high-profile mishaps have exposed gaps in how the government manages and safeguards seized crypto assets. For many lawmakers, the Bithumb Bitcoin error is not an isolated event but part of a broader pattern of weak infrastructure and insufficient technical expertise within regulatory agencies.
Industry experts note that South Korea’s rapid embrace of digital finance has outpaced the capacity of its regulators to keep up. Despite implementing stricter know-your-customer rules and exchange licensing frameworks, the Bithumb Bitcoin error shows that system-level vulnerabilities persist.
A turning point for South Korea’s crypto policy
The incident has reignited calls for comprehensive reform of the nation’s crypto oversight structure. Lawmakers are proposing a dedicated digital asset authority that operates independently from the FSC, designed to focus solely on blockchain markets and investor protection.
Analysts believe the outcome of the Bithumb Bitcoin error investigation could set a precedent for how South Korea approaches exchange accountability going forward. If the probe results in meaningful enforcement actions or regulatory upgrades, it could signal a shift toward more robust supervision of the country’s growing crypto ecosystem.
However, if authorities fail to act decisively, the Bithumb Bitcoin error may deepen skepticism about the government’s readiness to safeguard one of Asia’s most active crypto markets. With global exchanges watching closely, the next few weeks could determine whether South Korea reclaims its reputation as a leader in digital asset governance or remains mired in controversy.
Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards.
