South Korea's financial authorities said on Feb. 8 they decided to inspect overall internal controls at all virtual asset exchanges over an incident at cryptocurrency exchange Bithumb involving an erroneous bitcoin payout.

The Financial Services Commission held an emergency review meeting chaired by Chairman Lee Eok-won (이억원) with the Financial Intelligence Unit (FIU) and the Financial Supervisory Service on the day and discussed measures to improve the system in response to the Bithumb incident.

The financial authorities also discussed user compensation measures at an emergency review meeting a day earlier in response to a plunge in bitcoin prices.

Lee instructed officials to continue monitoring whether additional user 피해 occurs, the progress of the watchdog's on-site inspection and trends in the virtual asset market.

He instructed officials to use the incident as an opportunity to inspect overall internal controls not only at Bithumb but at all exchanges, and to establish appropriate internal control systems, saying structural vulnerabilities in exchanges' internal control systems had been exposed.

In particular, the authorities raised the need to focus inspections on whether exchanges have properly built control devices when paying virtual assets to users, including a verification system between ledgers and held virtual assets, multi-step confirmation procedures and controls to prevent human error.

Accordingly, the plan is to inspect overall internal controls at all exchanges with the Digital Asset eXchange Alliance (DAXA) at the center, and for the Financial Supervisory Service to conduct on-site inspections based on the results.

At a more fundamental level, the authorities will also pursue measures through a second-stage virtual asset law to impose on exchanges an obligation to establish internal control standards comparable to those of financial firms.

They also plan to pursue measures to have virtual asset business operators regularly checked by external institutions for their virtual asset holdings and to stipulate no-fault liability for virtual asset operators if users are harmed due to computer system accidents and other incidents.

[Yonhap News Agency]