South Korean lawmakers are increasing pressure on financial regulators after a system failure at Bithumb, the country’s largest cryptocurrency exchange, led to the accidental distribution of more than $43 billion worth of Bitcoin (BTC) earlier this month.

The February 6 incident sparked political scrutiny of both the exchange itself and the agencies responsible for supervising the virtual assets market.

Behind the huge Bitcoin Bithumb blunder

According to According to local reports in The Korea Times, members of the National Assembly questioned whether such a huge error could slip through despite repeated regulatory inspections.

Rep. Kang Min-guk of the main opposition People’s Power Party revealed that the country’s Financial Services Commission (FSC) has reviewed Bithumb three times between 2022 and 2025.

During the same period, the Financial Supervisory Service (FSS) carried out three separate audits. However, regulators failed to detect what is now being described as a critical structural weakness in the sector exchange system.

Kang argued that existing oversight mechanisms are insufficient. He stressed that safeguards were insufficient to prevent a single employee from initiating mass coin transfers. Kang said:

This episode is not just a technical failure, but a case that exposes deeper structural weaknesses in the virtual asset market, including supervisory complacency and regulatory gaps.

Instead of assigning users Bitcoin worth 2,000 won – approximately $1.38 – the system incorrectly assigned 2,000 Bitcoins per user. A total of 620,000 Bitcoins were incorrectly distributed.

Rep. Han Chang-min of the miniature Social Democratic Party also criticized regulators, questioning whether supervisory authorities had meaningfully assessed the exchange’s internal systems. “The authorities appeared to shift responsibility to Bithumb despite its oversight role,” Han said.

Broader supervision of cryptocurrencies

In response to the incident, the FSS extended the deadline for a formal investigation from February 13 to the end of the month, citing the need for additional time.

The eight-person inspection team is now intensifying its review, focusing on possible investor protection violations and anti-money laundering compliance with AML regulations.

Particular attention is paid to the architecture of the system, which allowed users to add coins that are not actually owned by the exchange. Regulatory authorities did not rule out the possibility of detecting further incorrect distributions.

Financial authorities have reportedly formed a crisis response team separately in cooperation with the Digital Asset eXchange Alliance (DAXA), a self-regulatory body representing national exchanges.

The team began inspecting asset verification and internal control systems on four other platforms – Upbit, Coinone, Korbit and GOPAX. Any shortcomings are expected to be addressed in DAXA’s self-regulatory guidelines and may impact the next phase of cryptocurrency legislation in South Korea.

At the time of writing, Bitcoin is trading at $67,763, down 2% over the past seven days and showing minimal change since Thursday’s trading session.

Featured image from OpenArt, chart from TradingView.com