Watchdog vows to accelerate second-phase crypto rules focused on user protection
Following the “ghost bitcoin” incident at South Korea’s second-largest cryptocurrency exchange, Bithumb, the Financial Supervisory Service will step up efforts to regulate the virtual asset industry, the watchdog’s chief said Monday.
Unveiling the agency’s 2026 policy agenda during a press briefing at its headquarters in Yeouido, Seoul FSS Gov. Lee Chan-jin stressed efforts for a trustworthy virtual asset trading environment, including full-scale inspections of crypto exchanges and enhanced legislation.
“The Bithumb incident bluntly exposed the structural flaws in virtual asset trading systems,” Lee said, adding, “There are many aspects of the case that we view as extremely serious.”
On Friday, Bithumb mistakenly distributed 620,000 bitcoins, far exceeding its actual holdings, to hundreds of users during a promotional event, creating so-called “ghost bitcoins” on its internal ledger.
While the regulator has launched an on-site inspection following the incident, Lee warned the process could be escalated into a full investigation if any illegal activities are uncovered.
“We will also inspect internal controls at other crypto exchanges and work to create an environment in which users can trade with confidence,” he said.
Lee added that the latest incident would be reflected in the upcoming second phase of virtual asset legislation.
"While we are drawing up the second phase of virtual asset legislation, measures to address structural vulnerabilities at exchanges, exposed by the recent Bithumb incident, will be reflected," he said.
Korea is currently moving to adopt the second phase of the legislation, focusing on the regulation of industry players. The first phase of the regulatory framework took effect in July 2024.
“As virtual assets are being incorporated into the legacy financial system, there remains the task of strengthening the regulatory and supervisory framework. This could serve as an opportunity to put the system in place properly,” he said.
As part of its 2026 policy agenda, the watchdog will focus its inspection capacity on high-risk incidents that could potentially lead to consumer harm. The FSS is currently conducting high-profile probes and regulatory actions involving MBK Partners, Coupang, and banks over the misselling of equity-linked securities.
The regulator also said it would establish a supervisory framework aimed at preventing cybersecurity risks in the financial sector. The measures include introducing punitive fines for related incidents, strengthening the security responsibilities of chief executive officers and chief information security officers, and rolling out mandatory disclosures on cybersecurity.
"With hacking incidents and cybersecurity breaches occurring frequently last year, there are limits to preventing accidents through post-sanctions. We therefore aim to shift toward a preventive supervisory framework focused on risk prevention,” he said.
By Im Eun-byel (silverstar@heraldcorp.com)
