TLDR
- South Korea’s FSC ordered exchanges to reconcile balances every five minutes.
- The move followed Bithumb’s mistaken Bitcoin payout during a February promotion.
- Exchanges must add automatic trading halts for major balance mismatches.
- External audits will shift from quarterly reviews to monthly checks.
- Platforms must publish more detailed wallet and asset disclosure data.
South Korea’s Financial Services Commission has ordered domestic crypto exchanges to strengthen balance control systems after Bithumb’s payout error. The regulator said exchanges must reconcile user balances with actual wallet holdings every five minutes. The rule is due to take effect by the end of May.
The move followed an emergency review involving major exchanges and the Digital Asset Exchange Alliance, or DAXA. Regulators said several platforms were still checking balances only once every 24 hours. That gap drew scrutiny after Bithumb’s mistaken Bitcoin payout exposed weaknesses in exchange controls.
The FSC said it had “prepared a continuous balance reconciliation system to enable immediate action when discrepancies arise.” It also said the five-minute standard was chosen based on average processing times and system load. The regulator is now pushing exchanges toward faster internal monitoring.
The case has drawn attention because balance checks are central to exchange operations. When records do not match actual assets, users can face trading problems and delayed responses. South Korean regulators now want those gaps detected within minutes rather than hours.
Bithumb Incident Triggered the Latest Regulatory Response
The regulatory action follows a February event tied to a Bithumb promotion. During that process, staff reportedly entered the payout unit as Bitcoin instead of Korean won. That led to a major mismatch between intended rewards and actual distributions.
One account said the error resulted in 2,000 BTC being sent per user instead of a planned 2,000 won reward. Another report said 620,000 Bitcoin was mistakenly sent to 249 users. Regulators focused on the broader control failure and the response time that followed.
Bithumb later said it had “failed to uphold the primary principles of virtual asset trading platforms: stability and integrity.” The exchange apologized to users and said it would compensate losses tied to the event. It also said affected accounts were frozen within about 20 minutes.
According to the provided material, Bithumb recovered most of the funds on the same day. The remaining portion that had already been sold was covered from company reserves. The exchange also said some users would receive 110% reimbursement if they sold during the crash window.
New Rules Add Auto Halts, Audits, and Wallet Disclosures
Under the new FSC directive, exchanges must install automated systems that compare internal ledgers with wallet balances every five minutes. Each check must be logged, and platforms must respond quickly when mismatches appear. This requirement is aimed at reducing the chance of undetected shortfalls.
The regulator also ordered exchanges to create automatic trading halts when large balance gaps are detected. These kill switches are designed to stop activity before problems spread across the platform. Regulators said some exchanges either lacked those controls or relied on manual action.
External oversight is also being expanded. Accounting reviews will now move from quarterly to monthly. Exchanges must also publish more detailed asset disclosures, including wallet-by-wallet and asset-by-asset figures rather than a single reserve ratio.
The new standards also cover high-risk accounts and manual payouts. These accounts must be separated from routine operations. Large transfers will need third-party cross-checks and multi-level approval to reduce insider and operational risk.
Korean crypto regulation enters a stricter phase
The FSC said it plans to connect these steps to a broader virtual asset bill. That suggests the current measures may become part of a wider framework for exchange oversight. South Korea has already increased scrutiny of trading fees, lending practices, and customer protections in crypto.
Bithumb has said it will cooperate with regulators and update its systems. The exchange told authorities it would adopt “improved asset verification processes, multi-step payment approvals, and the implementation of an AI-driven safeguard system.” These upgrades are intended to monitor abnormal activity at all times.
The latest rules show that South Korean regulators want exchanges to operate with tighter internal discipline. Five-minute reconciliation, automatic halts, and monthly audits now form the center of that approach. The changes are focused on preventing another large mismatch between exchange records and customer assets.
