South Korea’s central bank says crypto exchanges should have their own “circuit breakers” that halt trading to prevent a repeat of the market fallout after Bithumb mistakenly sent more than $40 billion in Bitcoin to its customers in February.
The Bank of Korea said in a payments report on Monday that lawmakers should consider introducing mechanisms similar to the Korea Exchange’s trading curbs to suspend trading if crypto prices suddenly fluctuate.
“Currently, the virtual asset industry lacks internal control mechanisms and faces lower regulatory intensity compared to established financial institutions,” the bank said.
“Consequently, as similar incidents could occur at other virtual asset exchanges, it is necessary to strengthen relevant regulations to prevent them in advance,” the report added.
It comes as South Korean lawmakers are currently looking to pass laws to further regulate crypto, which the Bank of Korea said should include its suggested measures “to enhance the safety and transparency of virtual asset exchange operations.”
In early February, Bithumb erroneously sent customers 620,000 Bitcoin (BTC), worth around $42 billion at the time, instead of 620,000 Korean won, worth $400.
The price of Bitcoin on Bithumb fell as users rushed to sell, causing others to panic-sell and further driving down its price, according to the bank’s report.
A translated graph showing the price of Bitcoin on Bithumb (blue line) compared to Upbit (yellow line) after Bithumb’s erroneous Bitcoin transactions. Source: Bank of Korea
Bithumb halted trading and reversed its Bitcoin sends within minutes, but the exchange said that 1,788 BTC, worth around $125 million, had been sold before it could act, and it covered the shortfall using company reserves.
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The Bank of Korea suggested that crypto exchanges should be required to have systems capable of detecting and preventing “erroneous payments caused by human error.”
It added that exchanges should also have systems to automatically verify a platform’s internal assets compared to those on the blockchain to flag discrepancies.
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