From now on, virtual asset exchanges must check every five minutes whether their electronic ledgers match their actual holdings and establish internal controls on par with financial companies. The financial authorities said problems such as system deficiencies and weak internal controls were found after they inspected Bithumb, the virtual asset exchange where a "60 trillion won-level Bitcoin mispayment incident" occurred.
The Financial Services Commission held a meeting with the virtual asset industry at the Seoul Government Complex on the 6th and discussed follow-up measures to the Bithumb mispayment case.
On Feb. 6, Bithumb attempted to pay 620,000 won as an event reward but misentered the unit as "Bitcoin," mispaying 620,000 Bitcoins. That was 13 times more than Bithumb's actual Bitcoin holdings, amounting to about 60 trillion won.
Afterward, the Financial Services Commission (FSC), the Korea Financial Intelligence Unit (FIU), the Financial Supervisory Service, and the Digital Asset eXchange Alliance (DAXA) jointly formed an emergency response team and urgently inspected exchanges' user asset custody status and internal control systems. The FSC found in this inspection that Bithumb's reconciliation (checking an exchange's holdings against ledgered assets) system was inadequate and that it lacked a "transaction blocking measure (Kill Switch)" system to immediately halt problematic transactions.
Bithumb checks reconciliation on a daily basis, while its rival Upbit operates an automated system that reconciles every five minutes. Based on the inspection results, the FSC decided to mandate the establishment of a five-minute reconciliation system for all exchanges. It will also specify the "transaction blocking measure criteria" to automatically halt transactions when large mismatches are detected in reconciliation.
The audit cycle by an external accounting firm will also be shortened from every quarter to every month. The scope of disclosure of audit results will be expanded to "wallet and ledger holdings by virtual asset item."
To strengthen exchanges' internal control systems to the level of financial companies, a standard compliance monitoring program will be established. Exchanges must review their internal control systems every half-year and report the results to the financial authorities. The financial authorities plan to enact and revise self-regulations for system improvements in April and complete the establishment of IT systems for continuous reconciliation by May. They will also soon start sanction procedures regarding the Bithumb mispayment.