Bank of Korea Urges Trading Halts After Bithumb Bitcoin Crash

South Korea’s central bank is calling for stricter rules in crypto trading. The Bank of Korea has asked exchanges to introduce circuit breakers, similar to those used in stock markets. 

This move comes after a major incident on the crypto exchange Bithumb. A payout error caused a sudden drop in Bitcoin prices and raised concerns about safety in the market. Now, regulators want stronger systems in place to prevent such events in the future.

Bithumb Error Triggers Sudden Price Drop

The issue started earlier this year when Bithumb made a mistake during a payout. Instead of sending rewards in Korean won, the exchange accidentally sent Bitcoin. This led to a large amount of BTC being credited to users by mistake. Reports say the error involved a huge amount and some users quickly sold the extra Bitcoin.

Because of this, Bitcoin’s price on Bithumb dropped sharply within minutes. At one point, the price fell to around $55,000, far below normal levels. The exchange later acted quickly. It paused trading and withdrawals and managed to recover most of the funds. However, some losses still occurred.

Central Bank Calls for Circuit Breakers

After reviewing the incident, the Bank of Korea pointed to weak internal systems as the main problem. Now, it is asking crypto exchanges to add circuit breakers. These are tools that stop trading when prices move too fast.

For example, if a coin drops by a certain percentage, trading would pause automatically. This gives time for the market to calm down and prevents panic selling. In traditional markets, similar systems already exist. In South Korea, stock trading stops for a short time if prices fall too quickly. The central bank believes crypto markets should have the same kind of protection.

More Safety Measures Suggested

Along with circuit breakers, the Bank of Korea has suggested several other changes. First, it wants stronger internal controls. This includes multi-step approval systems for payments and transfers. Second, it recommends real-time checks between exchange records and blockchain data. This can help catch errors early.

Third, it calls for better fraud detection systems. These tools can spot unusual activity and stop it before damage spreads. In the Bithumb case, officials said it took around 40 minutes to respond. Faster action could have reduced the impact. With this, regulators now want systems that can react instantly.

Rules May Be Added to New Law

The Bank of Korea also wants these changes included in South Korea’s upcoming Digital Asset Basic Act. This new law aims to set clear rules for the crypto industry. It will likely cover how exchanges operate and how they protect users. Officials say crypto platforms currently have weaker controls compared to traditional financial institutions. So, adding these rules could help improve trust and stability in the market.

Focus Shifts to Safer Crypto Trading

The Bithumb incident has become a warning for the industry. It showed how quickly problems can spread when systems fail. It also showed that crypto markets still lack some basic protections. Now, the Bank of Korea and regulators are pushing for change.

In simple terms, the goal is to make crypto trading safer for everyone. With better systems in place, future mistakes may cause less damage. As South Korea moves forward with new rules, other countries may also watch closely and consider similar steps.

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