Key Highlights
- Bank of Korea flags Bithumb error as proof crypto markets lack safeguards, pushing for circuit breakers to limit sudden losses and chaos.
- A simple input mistake triggered a $43B disruption, exposing weak controls and delayed response that allowed losses to spread quickly.
- Rising security risks and policy debates, including tax changes, add pressure on South Korea to tighten crypto oversight fast.
South Korea’s central bank has raised concerns after a major error at a local crypto exchange exposed gaps in how the market is controlled. On Monday, the Bank of Korea called for a circuit breaker system similar to those used in stock markets in its 2025 Payment and Settlement Report.
It cited the Bithumb incident in February as a key example of what can go wrong. The issue started during a promotional event that was meant to pay customers between 2,000 and 50,000 won (about $1.40–$35) each and involved a simple input mistake. It has since raised wider questions about risk controls and human error in crypto trading systems.
The problem occurred on February 6, 2026 when a staff member entered Bitcoin instead of Korean won. That mistake led to the transfer of 620,000 BTC, worth roughly 60 trillion won (about $43 billion), into user accounts. The total value reached about $43 billion at the time.
As a result, the bitcoin-KRW trading pair on Bithumb fell from 98 million won to 81 million won, a drop of about 17.3%, while prices on other exchanges such as Upbit remained stable. Users recorded losses of approximately 1 billion won during the sudden price disruption. The Bank of Korea said weak internal controls allowed the error to spread quickly— specifically through panic selling, automatic stop-loss triggers, and forced liquidations of loans collateralized with Bitcoin.
Weak controls trigger regulatory alarm
The Bank of Korea said the exchange took about 20 minutes to notice the mistake, identifying the situation at around 7:20 PM. During that time, it could not stop users from moving or selling the funds. Customer deposits and withdrawals were eventually frozen between 7:35 and 7:40 PM, but by then the losses has already grown. The BOK said, “To prevent this from happening at other exchanges, related regulations need to be strengthened.”
It also said exchanges should have systems that quickly detect input errors. Additionally, it called for automatic trading halts when unusual orders appear. It went further and suggested a market-wide circuit breaker to limit sharp price swings. The central bank also urged lawmakers to include these safeguards in the upcoming Digital Asset Basic Act.
Broader pressure on crypto oversight
Bithumb later took legal steps to recover some of the remaining funds from users. The exchange said it is trying to reclaim about 7 BTC still held in private wallets. However, the incident continues to expose gaps in how digital asset platforms manage risk and safeguard user funds.
At the same time, South Korea is debating how to handle crypto taxation. Lawmakers have proposed scrapping a planned 20% tax on digital asset gains. They say taxing these profits could amount to double taxation and create unfair conditions for investors. They also warn that rules for foreign investors could become too complex to apply in practice.
Meanwhile, security concerns are adding another layer of pressure on the market. Reports suggest North Korean IT workers have been involved in decentralized finance projects since 2020.
MetaMask security researcher Taylor Monahan said some of these workers have quietly contributed to crypto platforms without being detected. In addition, hacking groups such as Lazarus have been linked to large-scale crypto thefts worth billions since 2017.
South Korea is now under increasing pressure to tighten oversight of its crypto market. The Bank of Korea’s push for circuit breakers shows growing concern about both system errors and security risks in digital asset trading. Together, these issues are driving regulators to rethink how exchanges should be controlled and monitored.
Also Read: BOK Nominee Supports CBDC While Backing Regulated Stablecoins
