South Korea watchdog says tougher crypto rules needed after $40 billion giveaway

By Jihoon Lee

SEOUL, Feb 9 (Reuters) - South Korea's fiscal marketplace watchdog said connected Monday section speech Bithumb's unintentional giveaway of much than $40 cardinal successful bitcoin to customers raises the ​need for tougher regulations to code the vulnerabilities of cryptocurrencies.

The cryptocurrency speech said connected Saturday ‌it had accidentally fixed distant the bitcoin to customers arsenic promotional rewards, triggering a crisp selloff connected the exchange.

Lee Chan-jin, politician ‌of the Financial Supervisory Service (FSS), told a property league that determination was a request for improved regulatory mechanisms to code specified risks, adding that authorities volition earnestly see the problems revealed by the incidental arsenic they question to bring integer assets nether regulatory power with legislation.

"It is simply a lawsuit that shows the structural problems ⁠of physics systems for virtual assets. There ‌are galore areas we are earnestly looking into, and we are peculiarly disquieted astir the contented of physics systems," Lee said.

"There are tasks to importantly amended the ‍regulatory system, arsenic virtual assets are successful the process of being brought into the bequest fiscal system," Lee said.

South Korea introduced the Virtual Asset User Protection Act successful July 2024 to amended support crypto investors pursuing a marketplace ​rout successful 2022 triggered by the illness of cryptocurrencies terraUSD and luna.

The authorities aims to present different ‌bill further widening regulatory power implicit integer assets, portion discussions are besides ongoing among policymakers and lawmakers implicit won-denominated stablecoins.

"It is regrettable specified an incidental happened astatine a clip erstwhile determination were moves by fiscal firms to foster the industry, specified arsenic M&A deals, connected expectations of much argumentation support, which volition present beryllium delayed," a marketplace expert said, requesting anonymity owed to the sensitivity of the matter.

Of the ⁠total 620,000 bitcoins fixed distant by Bithumb connected Friday, 99.7% ​were retrieved by the exchange, according to the archetypal probe ​results by fiscal authorities. Of the 1,786 bitcoins already sold earlier the speech suspended transactions, 93% were retrieved.

On media reports that Bithumb gave distant much bitcoin than it ‍actually held, FSS's Lee said ⁠the contented of "ghost coins" would person to beryllium resolved archetypal for cryptocurrencies to go bequest fiscal assets.

Those who already sold the accidentally fixed bitcoins are legally obligated to instrumentality them to ⁠the exchange, Lee added.

On the government's argumentation program to present spot bitcoin exchange-traded products, Lee said helium would explicit cautious views ‌that stableness needed to beryllium ensured for it to beryllium regarded arsenic a bequest ‌financial asset.

(Reporting by Jihoon Lee; Editing by Muralikumar Anantharaman)