Lee Chan-jin (이찬진), head of the Financial Supervisory Service, said it will complete inspection steps into Bithumb's bitcoin mispayment case and move to sanctions after additional legal review of whether it violated the Virtual Asset User Protection Act.

At a monthly press briefing at the Financial Supervisory Service headquarters in Seoul on Wednesday, Lee said, "We confirmed flaws in internal controls during the inspection process related to Bithumb." He added, "We are also preparing measures to improve systems across the digital asset market."

He explained, "We carried out the work as a formal inspection from Feb. 10 to March 6 and completed all inspections." He added, "We are currently conducting additional legal review on acts that violate the Virtual Asset User Protection Act."

He added, "The current user protection law has limitations, and once the review is completed, sanctions procedures will proceed."

He also stressed that the issue does not stop with Bithumb alone.

Lee said, "An emergency response team made up of the Financial Services Commission, the Financial Intelligence Unit and the Financial Supervisory Service checked internal control violations at 4 exchanges, including Upbit, Coinone, Korbit and Gopax, and we are preparing improvement measures." He added, "Once improvement measures are organised on what their asset status is and how they are running events that provide financial benefits, there will be an announcement at the government level."

On the Financial Supervisory Service's submission to parliament of an opinion that it should be given authority to supervise digital asset exchanges at the level of banks, Lee said, "There have been incidents involving digital assets and also online platforms, so it is correct that we gave the opinion that this should be considered when legislating on that issue."

He described the Virtual Asset User Protection Act as "important transitional legislation" for user protection, but said a Digital Asset Basic Act and a basic-law framework are needed. He also said the watchdog's views on regulatory blind spots were delivered to parliament and policy authorities.

He also set out a clear direction for institutional supplementation. Lee said, "Our approach going forward is ultimately from the perspective of strengthening user protection." He added, "A minimal regulatory framework is needed to prevent major IT incidents or incidents that could deliver a large shock to the value of investor assets."

He also said, "Supplementation is needed, at the level of the Corporate Governance Act or the Electronic Financial Transactions Act, for areas that are not covered under the current system."