South Korea has moved to tighten oversight of crypto exchanges, ordering platforms to reconcile internal ledgers with actual asset holdings every five minutes after an inspection uncovered gaps in internal controls.
The directive was issued by the Financial Services Commission (FSC) following a meeting with major exchanges and the Digital Asset Exchange Alliance (DAXA).
The discussions were based on findings from an emergency inspection launched after the Bithumb payout incident earlier this year.
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Regulators found that three of the country’s five largest exchanges were reconciling balances only once every 24 hours, limiting their ability to detect and respond to discrepancies on time.
Mechanisms designed to halt trading during major mismatches were also found to be insufficient, raising concerns over how exchanges would handle large-scale operational errors.
The issue came into focus in February when Bithumb mistakenly distributed 620,000 BTC to 249 users during a promotional event.
The exchange said it recovered 99.7% of the funds the same day, while the remaining 1,788 BTC that had already been sold was covered using company reserves.
Under the new requirements, exchanges must implement automated systems that match internal records with wallet balances on a five-minute cycle.
They are also required to define clear thresholds for triggering automatic transaction halts if discrepancies exceed set limits.
Oversight is being extended to internal operations as well. High-risk processes such as promotional payouts will require stronger controls, including third-party cross-checks and multi-level approval systems.
Exchanges must also separate high-risk accounts and introduce automated verification tools for payments.
Audit timelines are being shortened, with external reviews shifting from quarterly to monthly. Disclosure requirements will also expand to include more detailed reporting of asset balances across both wallets and internal ledgers.
“The financial authorities and the DAXA plan to complete the rule changes needed to implement the improvement measures within April this year,” the FSC said.
The latest directive comes as exchanges in the country are seeing increased capital moving off local platforms.
FSC data showed that crypto outflows from South Korean exchanges reached 90 trillion won, or about $60 billion, in the second half of 2025, up 14% from 78.9 trillion won, or $52.5 billion, in the first half.
Regulators stepping up oversight globally
Across the globe, Indian regulators have also stepped up compliance efforts to keep crypto activity in check and avoid tax leaks.
Besides registering as a reporting entity under the Financial Intelligence Unit, exchanges are also required to share customer transaction details with the country’s tax authorities for assessment.
Recent local reports suggest that several users who did not disclose their crypto income have started receiving Section 148A notices for the 2021–22 financial year.
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