As a Bitcoin mispayment incident worth 62 trillion won erupted at the virtual asset exchange Bithumb, Financial Supervisory Service Governor Lee Chan-jin said it is necessary to review the virtual asset transaction framework. He added that, during the legislative process for the Basic Act on Digital Assets (virtual asset Phase 2 law), he would think deeply about what needs to be supplemented based on this incident. The Basic Act on Digital Assets is additional legislation intended to cover areas not regulated by the current Virtual Asset User Protection Act, including virtual asset service providers, virtual asset transactions, and related infrastructure.
Lee said at a work plan briefing held at the Financial Supervisory Service in Yeouido, Seoul, on Feb. 9, "If the IT-related issues of virtual assets are not resolved, it is questionable whether they can be incorporated into legacy (regulated) finance. We will seriously consider matters related to the virtual asset system during the Phase 2 legislative process."
Earlier, on the afternoon of Feb. 6, Bithumb mistakenly paid 620,000 Bitcoins to 249 participants in a free distribution (airdrop) event. It was supposed to pay a total of 620,000 won, but an employee error entered "won" as "Bitcoin." Bithumb has yet to recover 125 Bitcoins (about 13 billion won), and the Financial Supervisory Service launched an on-site inspection the following day.
Lee said, "We are looking into how the misentry was possible, and once the cause is identified, we will improve the system to prevent consumer harm in advance."
Lee said discussions with the Financial Services Commission and the special judicial police (special investigators) have entered the final stage. The special investigators system grants a limited scope of investigative powers to civil servants of relevant administrative agencies to enhance the efficiency of investigations in specialized fields. Currently, the Financial Supervisory Service's special investigators are restricted to initiating and conducting investigations into crimes specified in the Financial Investment Services and Capital Markets Act that are "cases under the direction of a prosecutor."
Lee said, "We have concluded consultations on a plan to grant ex officio investigative authority to the Financial Supervisory Service's capital markets special investigators and to newly introduce features reflecting the characteristics of areas such as illegal private financing, which involve livelihood-related crimes. Even if ex officio investigative authority is granted, investigations will be conducted under prosecutors' direction in accordance with the Criminal Procedure Act, and financial transaction information can be obtained only through a court warrant."
Lee added, "Since there are concerns that investigative powers could become excessive when special investigators initiate ex officio investigations, we will also put in place strict control mechanisms." The Financial Supervisory Service agreed with the Financial Services Commission not to introduce special investigators in the areas of accounting oversight or inspections of financial companies.
Lee raised the need for the Financial Supervisory Service to become a state institution, saying that this is a different concept from designation as a public institution, which he has opposed so far. He said, "A state institution is an independent body with a fiscal structure different from that of a public institution, with internal staff in special-service positions and a pay system different from general civil servants," adding, "The Financial Supervisory Service should not be affected by changes in political power. I oppose public institution status because there is a possibility that policy directions could change with an administration."
Lee also said he is considering increasing the number of non-lawyers on the Sanctions Review Committee, which determines the level of disciplinary action against financial companies. He said, "The lawyer-centered sanctions committee tends to be somewhat rigid. We will strengthen the composition of non-lawyers so that we can better account for accuracy in policy and on-the-ground realities."