FSS chief: Crypto off-chain ledger trading requires a full structural review

Minseung Kang

Summary

Lee Chan-jin, governor of the Financial Supervisory Service (FSS), said that in connection with the latest crypto erroneous disbursement incident, there is a need to review internal controls and systems across crypto exchanges.
The financial authorities said they take seriously the fact that under the ledger trading model, non-existent crypto assets could have been disbursed and traded, and that they will thoroughly examine the systemic issues.
The financial authorities said they will review necessary measures under the current Virtual Asset User Protection Act and the proposed Digital Asset Basic Act, and noted the need for risk management at the level of the licensing regime going forward.

*Financial Supervisory Service. /Photo=Reporter Noh Jeong-dong dong2@hankyung.com*

South Korea’s financial authorities said they see the need for an investigation and regulatory improvements in connection with a recent incident involving the erroneous disbursement of crypto assets.

According to the industry on the 9th, Lee Chan-jin, governor of the Financial Supervisory Service (FSS), said at a “2026 Key Business Plan Briefing” held at the FSS headquarters in Yeouido, Seoul, that “the biggest problem in this case is that crypto assets that do not exist were traded,” adding that “there is a need to check internal controls and systems across crypto exchanges.” He added, “Since other exchanges have similar structures, we are also looking into the situation across the industry as a whole.”

The incident is believed to have arisen from a structure in which crypto trades are processed not through real-time transfers on the blockchain, but first by changing figures on an exchange’s internal ledger. So-called “ledger trading” is commonly used for speed and cost reasons, but if security safeguards are inadequate, it can also lead to situations where assets that do not actually exist are traded.

“Ledger trading itself is not illegal, but we view it seriously that non-existent assets could have been disbursed and traded,” Lee said, stressing that the FSS will “take a thorough look at why this was possible and what systemic issues existed.”

The financial authorities say they can review necessary measures under the current Virtual Asset User Protection Act in relation to this case. Lee said, “There are criticisms that crypto exchanges sit in a regulatory blind spot, but it is possible to respond within the current legal framework as well.”

He also mentioned the possibility of linking the licensing regime to the Digital Asset Basic Act, which is currently being pursued in the legislature. “If the basic act is passed in the future, we also recognize that risk management at the licensing level will be necessary should similar problems recur,” he said.

However, Lee noted that “as this is a matter under investigation, it is difficult to prejudge the specific level of measures at this stage,” adding, “We will review the necessary response depending on the investigation results.”