South Korea Goes After Bithumb After a $43B Bitcoin Blunder One Typo Nearly Broke the Market

South Korea Tightens Oversight as FSS Escalates Audit Into Bithumb Systems

South Korea’s financial regulators are intensifying scrutiny of the cryptocurrency sector after a costly operational failure at one of the country’s largest digital asset exchanges reignited concerns about systemic risk, internal controls, and market integrity.

On February 10, 2026, the Financial Supervisory Service confirmed it had expanded its audit and supervisory review of Bithumb, following an incident that briefly injected hundreds of thousands of Bitcoin into the platform’s internal system due to human error.

The move signals a broader shift in regulatory posture as South Korea accelerates efforts to bring cryptocurrency exchanges under standards closer to those applied to banks and securities firms.

A Costly Mistake With Market-Wide Implications

The investigation stems from an incident on February 6, when a Bithumb employee mistakenly distributed 620,000 Bitcoin during a promotional event. The error occurred when the employee entered “BTC” instead of “Korean won” as the prize unit, unintentionally crediting users with digital assets worth approximately $43 billion at prevailing market prices.

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Crucially, the Bitcoin credited to users did not exist on the blockchain. Instead, the assets appeared only on Bithumb’s internal ledger, creating what regulators and industry experts now refer to as “ghost coins.”

At the time of the incident, Bithumb reportedly held approximately 46,000 Bitcoin in actual reserves, meaning the erroneous credit exceeded its real holdings by more than fourteen times. While no blockchain transfer occurred, the temporary appearance of massive balances triggered panic selling within the platform, sending Bitcoin prices on Bithumb down roughly 15 percent in minutes.

The Financial Supervisory Service is now examining how a single employee could initiate a system-level event capable of destabilizing market prices and user confidence.

Understanding the “Ghost Coin” Problem

As South Korea investigates Bithumb, regulators are focusing on a structural weakness exposed by the incident: the disconnect between internal exchange ledgers and on-chain reality.

Ghost coins are digital assets that appear within an exchange’s internal accounting system but are not backed by real blockchain balances. While such systems are common for speed and efficiency, they require strict safeguards to prevent unauthorized or erroneous credit creation.

In this case, users were able to see and, in some instances, attempt to trade the credited Bitcoin before the exchange intervened. The sudden surge in sell orders overwhelmed internal controls and triggered abnormal price movements.

Experts say the event highlights a critical vulnerability in centralized exchanges, where internal databases can momentarily override on-chain truth, creating risks not only for users but for broader market stability.

Emergency Measures and Damage Control

Bithumb moved quickly to contain the fallout. Within approximately 35 minutes of detecting the error, the exchange froze 695 accounts and suspended all withdrawals to prevent further trading or asset movement.

According to disclosures reviewed by regulators, the exchange has since recovered approximately 99.7 percent of the mistakenly credited funds. However, about 125 Bitcoin remain unaccounted for, representing a residual loss that remains under investigation.

To mitigate reputational damage and restore trust, Bithumb announced compensation measures for affected users. The exchange pledged to reimburse verified losses with an additional 10 percent bonus and established a 100 billion won protection fund, equivalent to roughly $68 million, to strengthen user safeguards going forward.

While these steps were welcomed by some market participants, regulators have indicated that compensation alone will not close the case.

Lawmakers Push for Structural Reform

The incident has drawn the attention of senior lawmakers and policy advisors, many of whom argue that the ghost coin phenomenon poses systemic risks comparable to unbacked leverage in traditional finance.

Several proposals are now under discussion in Seoul, including limits on individual ownership stakes in cryptocurrency exchanges. Under one plan, no single shareholder would be allowed to control more than 15 to 20 percent of an exchange, a measure aimed at improving governance and internal accountability.

Officials believe concentrated ownership can weaken oversight structures, particularly in fast-moving technology firms where decision-making authority may be narrowly held.

In parallel, the Financial Supervisory Service is reviewing whether mandatory internal control standards should be introduced across all licensed exchanges.

Dual-Approval Systems Under Review

Among the measures being considered is a requirement for “dual-approval” mechanisms for large asset transfers or balance adjustments. Under such a system, any transaction above a predefined threshold would require authorization from at least two independent parties.

This approach mirrors safeguards used in banking, treasury operations, and securities clearing systems, where separation of duties is designed to prevent both fraud and accidental errors.

Regulators are also reviewing Bithumb’s compliance history, including security incidents reported in 2024 and 2025, which had already placed the exchange under heightened observation before the latest event.

Market Confidence and Price Stability

While the broader cryptocurrency market did not experience sustained disruption beyond Bithumb’s platform, analysts warn that similar incidents at multiple exchanges could amplify volatility and erode confidence.

The episode underscores a persistent challenge for centralized crypto platforms: maintaining speed and usability without sacrificing control and transparency.

Market observers note that as digital assets become more integrated into mainstream finance, tolerance for operational failures is rapidly diminishing.

Expert Views on the End of Crypto’s “Wild West” Era

Industry analysts say the decision by South Korea to aggressively investigate Bithumb reflects a turning point in regulatory philosophy.

For much of the past decade, crypto regulation focused on monitoring, licensing, and consumer warnings. In 2026, that approach is evolving into direct intervention, enforcement, and mandatory system design requirements.

Experts expect regulators to push for advanced monitoring systems capable of detecting abnormal activity in real time. These systems may incorporate artificial intelligence to flag unusually large credits, trades, or balance changes before they affect the market.

While such measures could slow certain exchange operations, proponents argue they are essential to building long-term trust.

A Broader Signal to the Global Crypto Industry

South Korea has long been regarded as a bellwether for crypto regulation in Asia. Actions taken by its regulators often influence policy debates in neighboring jurisdictions.

The Bithumb case may accelerate similar reviews in other markets, particularly as regulators worldwide grapple with how to oversee centralized exchanges that operate at the intersection of technology and finance.

For the industry, the message is clear: operational resilience and governance are no longer optional.

What Comes Next

The Financial Supervisory Service has not yet announced penalties or enforcement actions related to the incident, but officials have indicated that findings from the audit will inform future regulatory frameworks.

As digital asset markets mature, regulators appear increasingly determined to ensure that exchanges meet standards comparable to those applied to traditional financial institutions.

For South Korea’s crypto sector, the Bithumb investigation may mark the beginning of a more disciplined, tightly regulated era, one in which rapid innovation must coexist with robust safeguards.

hokanews.com – Not Just Crypto News. It’s Crypto Culture.

Writer @Erlin
Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.
 
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