Watchdog Vows to Accelerate Second-Phase Crypto Rules Focused on User Protection
Following the “ghost bitcoin” incident at South Korea’s No. 2 cryptocurrency exchange Bithumb, the Financial Supervisory Service (FSS) will accelerate efforts to establish a comprehensive virtual asset framework prioritizing user protection, the watchdog’s chief announced Monday.
FSS Gov. Lee Chan-jin unveiled the agency’s policy agenda for 2026 at a press briefing held at its headquarters in Yeouido, Seoul. A key part of this agenda involves establishing a trustworthy virtual asset trading environment as a strategic priority to protect crypto investors.
“We are preparing to implement the second phase of virtual asset legislation, including measures to address structural vulnerabilities at exchanges exposed by the recent Bithumb incident, to protect virtual asset investors,” he stated.
South Korea is actively preparing to roll out the second phase of its virtual asset legislation, which will concentrate on regulating the distribution of virtual assets by industry participants and mandating stricter disclosure requirements for crypto exchanges and related businesses.
Lee further emphasized that the recent Bithumb incident underscores the structural limitations and inherent risks within the cryptocurrency industry.
“The core issue lies in the system’s susceptibility to erroneous entries. This vulnerability will require careful and serious consideration during the formulation of the second phase of the legislative process,” he explained.
While the FSS has launched an on-site inspection of Bithumb following the “ghost bitcoin” event, alongside other financial authorities, Lee also emphasized the critical need for comprehensive monitoring of other exchanges, with a particular focus on identifying and preventing unfair trading practices.
“We will also thoroughly inspect internal control systems at other crypto exchanges and diligently work to cultivate an environment where users can confidently trade digital assets,” he said.
“As virtual assets are increasingly integrated into the traditional financial system, a significant task remains: strengthening the existing regulatory and supervisory framework. This integration presents an opportunity to properly establish and refine the system,” he added.
As part of its 2026 policy objectives, the FSS will strategically allocate its inspection resources to address high-risk incidents that pose a potential threat to consumer interests and financial stability. The FSS is currently conducting significant probes and regulatory actions involving entities such as MBK Partners, Coupang, and banks concerning the misselling of equity-linked securities.
Furthermore, the regulator outlined plans to establish a robust supervisory framework to proactively mitigate cybersecurity risks within the broader financial sector. The proposed measures include introducing punitive fines for cybersecurity-related incidents, reinforcing the security responsibilities of chief executive officers (CEOs) and chief information security officers (CISOs), and implementing mandatory disclosures related to cybersecurity practices and incidents.
“Given the frequent occurrence of hacking incidents and cybersecurity breaches in the past year, reliance solely on post-incident sanctions has proven insufficient. Consequently, we aim to transition toward a preventive supervisory framework that prioritizes risk prevention and early detection,” he concluded.
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