Financial Supervisory Service Governor Lee Chan-jin said that in connection with Bithumb's erroneous bitcoin payouts, if the bitcoin in question was sold and converted to cash, there is an obligation to return it in kind. He also said it "laid bare the structural problems of virtual asset exchanges' ledger systems."
On the morning of Feb. 9, after briefing on this year's work plan, Lee said this at a press meeting regarding Bithumb's erroneous payouts.
The Financial Supervisory Service (FSS) convened an emergency meeting on the 7th, the day after Bithumb's erroneous payouts occurred, and began an on-site inspection, looking into Bithumb's customer asset management, IT systems to prevent incidents, and the adequacy of its internal controls.
Regarding the fact that Bithumb has not yet recovered about 13 billion won worth of bitcoin it paid out in error, Lee drew a line, saying it was not the essence of the case, but he noted that there is an obligation to return it to users.
He said, "If a user confirmed with the exchange whether the user had given me this bitcoin, there would appear to be no negligence," adding, "However, if that was not the case and it was sold and converted to cash, those users incur an obligation to return it in kind."
He added, "Because the exchange already specified that it would pay out bitcoin equivalent to 2,000 won, it is clear that this case is subject to the return of unjust enrichment."
Lee said, "We are discussing, at a working level, creating a regulatory and supervisory framework for the ledger system issue, and if it still is not resolved, reflecting it as a licensing risk."
He continued, "If any indication of legal violations is found, we will immediately switch to an on-site investigation," and added, "For any illegalities found in the investigation, we will take stern action in accordance with the relevant laws."
He also said, "We are determining whether there are aspects that run afoul of current law, including the User Protection Act," adding, "We do not share the view that sanctions are entirely impossible."
He went on, "We are particularly concerned about issues related to the IT system. We expect there will be serious points to consider in the second-stage legislation," suggesting that the results of this review will be reflected in the second-stage legislation.
On a question related to introducing spot exchange-traded funds (ETFs) for virtual assets, he said, "As virtual assets and legacy finance continue to be linked, we are now seeing a phenomenon in which a shock on one side triggers a chain reaction," adding, "One important part of that, some point out, is the impact of ETFs."
He added, "If stability on the legacy finance side is not ensured, the public cannot conduct financial transactions," and said, "From this perspective, I think we can offer a cautious view."
Lee also said that, regarding the Financial Supervisory Service's special judicial police (special police), a considerable degree of consultation had been completed with the Financial Services Commission.
He said, "As a result of close consultations with the Financial Services Commission (FSC), we concluded discussions on granting the FSS's capital market special police the authority to initiate investigations ex officio, and on newly introducing features tailored to the illegal private financing area among livelihood finance crimes," adding, "By contrast, we agreed not to grant special police powers in the areas of accounting oversight or inspections of financial companies."
He added, "Since concerns were raised that if the special police directly conduct ex officio investigations, investigative powers could become excessive, we plan to put in place strict control mechanisms," adding, "Specifically, before launching an investigation, we will require deliberation by the SFC's internal review committee to decide whether to commence the investigation."
He also provided an update on major sanction review committee proceedings underway at the FSS. Regarding misselling of Hong Kong equity-linked securities (ELS) by banks, he said, "The third sanction review committee will be held this week," adding, "Given the large scale of consumer harm, we are proceeding carefully and thoroughly."
On the sanction review involving Homeplus Co. majority shareholder MBK Partners, he said, "During the inspection, we closely investigated various allegations raised by the media, including asset-backed short-term bonds (ABSTB), and we are currently submitting the findings on legal violations and proposed actions to the FSS sanction review for deliberation."
He added, "In the course of deliberations, we are fully hearing the views of MBK and the officers and employees subject to sanctions, and because we must carefully and accurately review related legal issues, it is taking some time, but we will work to conclude the review swiftly."
Regarding the FSS sanction risk for some firms applying for licenses to issue promissory notes, he said, "We are doing our best to ensure that licensing for integrated managed accounts (IMA) and promissory note issuers does not face serious obstacles due to FSS sanctions."
On the ongoing inspection related to the Coupang case, he said, "It is fortunately the FSS's duty to check the adequacy of information- and lending-related matters, and we do not believe we treated them particularly unfairly or adversely just because they are Coupang affiliates." In Dec. last year, the FSS inspected Coupang Pay regarding customer financial information leaks and Coupang Financial regarding the adequacy of lending to sellers.
He said, "As we conducted the review, we found it necessary to verify more precisely, so we carried out a formal inspection in January, and if there are problems, we will take appropriate measures in accordance with the law."