As is widely known, finance is fundamentally a regulated industry. This means it is subject to strict and meticulous oversight by the government and financial authorities. Literally speaking, companies must report even the smallest details to regulators, undergo frequent inspections, and obtain approval from authorities to launch a single new product. The industry complains that government regulations hold it back, while the government struggles to find the right balance between regulation and autonomy. However, compared with other sectors such as manufacturing, finance is inevitably subject to heavier regulation because of its inherent nature of handling customers’ money.
In any transaction involving customers’ funds or the exchange of investment and returns, fair and strict rules—and the belief that these rules will be enforced—are essential. Without such rules and trust, transactions themselves cannot exist. In the finance and investment industries, unfair or one-sided regulations, or incidents that violate them, inevitably deal a fatal blow to trust.
Last week, a mistaken payment incident involving 61 trillion won worth of Bitcoin at Bithumb, the country’s second-largest cryptocurrency exchange, damaged the external credibility of South Korea’s crypto asset industry and exposed its structural vulnerabilities. While attempting to pay customers prize money of 620,000 won from an event, a staff member mistakenly entered the unit as “Bitcoin” instead of “won,” resulting in the erroneous payout of 620,000 bitcoins worth about 61 trillion won—an unprecedented blunder.
Bitcoin plunges to USD 66,000
It is astonishing that such an accident could occur due to a single employee’s mistake, revealing how inadequate internal controls and checks were. This was not an ordinary investor but an exchange responsible for managing orders and trades fairly and accurately, making the incident a clear failure of management capability. Moreover, coins that did not even exist were credited to investors’ accounts, and as investors sold them, prices collapsed, throwing the market into chaos—an archetypal example of backward market management.
Trust in the crypto asset industry is eroding further, as illustrated by last November’s hacking incident at Upbit, the nation’s largest crypto exchange, in which coins worth 44.5 billion won were stolen. How can customer assets be said to be properly managed under internal controls and management systems that cannot even prevent simple erroneous orders? Financial authorities must strengthen exchanges’ internal controls through thorough supervision and guidance. Currently, crypto investors are already suffering from extreme price volatility. If anxiety over such incidents—unrelated to asset prices themselves—is added to the burden, the crypto asset industry will inevitably be shunned by investors.
Disclaimer: This article is provided for informational purposes only and does not constitute investment advice.
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