BOK calls for introduction of circuit breakers for crypto exchanges
The central bank on Monday called for the introduction of mechanisms similar to the bourse operator's circuit breakers for cryptocurrency exchanges, citing the absence of such systems as a key factor behind a recent erroneous payment incident.
In February, Bithumb attempted to distribute bitcoin worth about 620,000 won (US$460) as prizes for a customer event, but accidentally ended up distributing 620,000 bitcoins worth about 60 trillion won due to an employee input error, reports Yonhap news agency.
Immediately after the incident, some users sold off the wrongly credited bitcoins in large volumes, causing bitcoin prices on Bithumb to plunge temporarily. Other users suffered losses due to panic selling and automatic sell orders, while some bitcoin-backed loans were forcibly liquidated.
"The primary cause was the lack of internal control systems designed to prevent such operational risks," the Bank of Korea (BOK) said in its annual payment and settlement report. "Compared to traditional financial institutions, the crypto asset industry has weaker internal controls and lower regulatory standards."
At the time of the incident, Bithumb allowed staff to distribute bitcoin without approval from supervisors or verification by internal monitoring departments.
Delays in recognising the incident and responding to it were also cited as factors that worsened the damage, as the exchange's fraud detection system failed to function properly, the BOK said.
To address the issue, the central bank said it is necessary to consider introducing system-level safeguards similar to the Korea Exchange (KRX)'s circuit breakers, which can halt trading in the event of abnormal transactions, such as large-volume orders or sharp price fluctuations.
"There is a need for IT systems that can automatically and in real time verify whether internal ledgers match blockchain balances, and prevent erroneous payments caused by human error," the BOK said.
