Financial regulators: "Crypto exchanges should be regulated to the same standard as financial institutions"

National Assembly pending-issue hearing on the 'Bithumb bitcoin mispayment' incident

Kwon Dae-young: "Reflect it in phase-two legislation to give it enforceability"

Lee Chan-jin: "Even 5 minutes to reconcile coin ledgers is too long… real-time monitoring is needed"

Financial authorities have converged on the view that crypto exchanges "must be governed identically—not merely to a level comparable—to (existing) financial institutions."

On the 11th, Kwon Dae-young, vice chairman of the Financial Services Commission, referred to Article 24 of the Corporate Governance Act, which addresses internal-control standards, during a National Assembly Political Affairs Committee hearing on the Bithumb incident, saying, "Virtual-asset exchanges also need to align their regulatory standards with existing firms."

Kwon said, "They need to be subject to ongoing monitoring, and we will reflect (internal-control standards) in phase-two legislation so they carry enforceability," adding, "We will accelerate the phase-two bill, but even before it takes effect, we will provide guidance and supervision so operators can implement the internal-control standards that have been put in place."

Lee Chan-jin, governor of the Financial Supervisory Service, also said, "Currently, internal-control standards and risk-management standards are not stipulated in the Virtual Asset User Protection Act," adding, "Because it is being run under a self-regulatory framework, there are institutional limitations."

He further stressed that systems reconciling a virtual-asset exchange’s actual bitcoin holdings with its ledger balances should be linked in real time.

"(In Upbit’s case) even 5 minutes is not short—it’s very long," he said, adding, "Only when an interfaced system ensures that actual holdings and ledger quantities match in real time can system safety be secured."

Bithumb reconciles actual holdings in its blockchain wallets with internal ledger quantities once a day. Upbit, by contrast, operates a system that reconciles holdings and ledger quantities at five-minute intervals. Even so, he viewed five minutes as still too long.

Lee cited the 2018 "phantom shares" incident at Samsung Securities, explaining, "Samsung Securities upgraded its IT system so that entries exceeding the total number of issued shares cannot be input at all."

Shin Min-kyung, Hankyung.com reporter radio@hankyung.com