South Korea’s central bank is pushing for the implementation of circuit breakers across cryptocurrency platforms, which are typically associated with traditional markets.
This comes after a multi-billion-dollar operational failure at a major exchange.
The 60 trillion won “fat finger” error
During a customer promotional event, Bithumb intended to distribute roughly 620,000 Korean won (approximately $460) worth of Bitcoin as prizes.
Instead, due to an employee “fat finger” error, the exchange accidentally distributed a staggering 620,000 Bitcoins.
According to the BOK’s investigation, Bithumb’s internal systems made it possible for the staff to distribute the crypto without approval from supervisors. Moreover, the exchange’s fraud detection system failed to function properly. This prevented the company from properly responding to the crisis.
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Users who received the erroneously credited Bitcoin quickly began selling off the assets in massive volumes, causing a localized flash crash on the Bithumb platform.
Retail users suffered heavy losses due to panic selling, automated sell orders were triggered, and numerous Bitcoin-backed loans were forcibly liquidated.
The central bank is demanding that crypto exchanges adopt rigorous safety mechanisms.
Specifically, the BOK wants to see the introduction of system-level safeguards similar to the circuit breakers used by the Korea Exchange (KRX).
Furthermore, the central bank stressed the need for sweeping technical upgrades to exchange infrastructure.
Recent regulatory developments
Meanwhile, South Korea’s Financial Services Commission (FSC) recently opened the door for corporate cryptocurrency trading. Roughly 3,500 publicly listed companies can now invest up to 5% of their equity capital into crypto.
South Korea has also rolled out some of the strictest Anti-Money Laundering (AML) standards for crypto.
The Bank of Korea is also advancing its Central Bank Digital Currency (CBDC) initiative (“Han River Project”).
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