Bank of Korea calls for 'circuit breaker' in local crypto market, citing Bithumb incident

The Bank of Korea said in a Monday report that the local cryptocurrency market needs a circuit breaker similar to those used in stock markets, citing Bithumb's fat-finger incident in February.

On February 6, Bithumb mistakenly transferred 620,000 BTC (worth $43 billion at the time) across hundreds of user wallets as part of a promotional campaign giveaway. The error reportedly stemmed from a staff member inputting the reward unit as BTC instead of KRW (Korean won).

The incident caused the bitcoin-KRW trading pair on the platform to plunge by roughly 15%, resulting in user losses. 

The central bank's latest Payment and Settlement report attributed the incident to a lack of internal controls and regulation within the digital asset market compared to traditional financial institutions.

The BOK also pointed out that Bithumb took 20 minutes to spot the error, and failed to prevent the bitcoin from being moved or sold, widening the losses for users.

"To prevent this from happening at other exchanges, related regulations need to be strengthened," the BOK wrote.

Exchanges should be required to adopt systems to detect and quickly shoot down such human errors, and market-wide safeguards, such as a circuit breaker that would block abnormally large orders or temporarily halt trading when crypto prices experience sharp fluctuations, the BOK said.

The central bank also called on legislators to consider adopting such measures in the upcoming Digital Asset Basic Act, which is expected to establish a comprehensive set of rules for the local industry.

Meanwhile, Bithumb has recently requested a court to freeze 7 BTC that it failed to recover. Following the incident, Bithumb faced significant scrutiny and investigations from local authorities, and has pushed back its IPO plans to 2028.