South Korea has ordered all crypto exchanges to reconcile their internal ledgers with actual asset holdings every five minutes following an emergency inspection that revealed significant weaknesses in internal controls.
The directive was issued by the Financial Services Commission (FSC) after a meeting with top crypto exchanges and the Digital Asset Exchange Alliance (DAXA). The inspection found that three of the country's five major exchanges were reconciling balances only once every 24 hours, hindering their ability to swiftly address discrepancies. Systems designed to halt trading during major mismatches were also deemed insufficient.
This move follows an incident in February where Bithumb mistakenly distributed 620,000 Bitcoin to users during a promotion. While the exchange recovered most of the funds, the event highlighted the need for more robust oversight.
Under the new measures, exchanges must implement automated ledger-to-wallet reconciliation systems operating on a five-minute cycle. They will also be required to establish clear criteria for triggering automatic transaction halts in cases of significant discrepancies. High-risk processes, such as promotional payouts, will face stricter oversight, including third-party cross-checks and multi-level approval systems.
External audits will also shift from quarterly to monthly, with expanded disclosures on asset balances by wallet and ledger. The financial authorities and DAXA aim to finalize these rule changes by April. Bithumb has also delayed its IPO plans to post-2028, focusing on strengthening accounting policies and internal controls.