Crypto Giants Upbit, Bithumb Unleash Massive $2.5M User Compensation

• Upbit allocates 3.14 billion won for compensation.
• Bithumb sets aside 377 million won for users.
• FSS ensures upgrades, scrutinizes AML policies.

South Korea’s premier crypto exchanges, Upbit and Bithumb, have committed to paying out over $2.5 million in compensation. This decision comes in the wake of severe technical disruptions that left countless users at a standstill during a crucial trading period last December.

South Korea’s Crypto Giants Commit to Major Payouts

In a landmark settlement, South Korean crypto exchanges Upbit and Bithumb will pay over $2.5 million to users. This compensation addresses losses from system disruptions during an unprecedented surge in trading activity. The payout is the largest of its kind in South Korea’s cryptocurrency market history.

Both exchanges suffered significant technical failures last December when an unexpected martial law announcement drove a massive increase in user traffic. Upbit experienced a user surge from 100,000 to 1.1 million, resulting in 99 minutes of downtime. Meanwhile, Bithumb faced 62 minutes of service disruption, during which users were unable to execute trades or withdraw funds.

The massive influx of users caused considerable service interruptions, and Bitcoin’s value plummeted. Consequently, Upbit has allocated over 3.14 billion KRW to compensate 596 cases, while Bithumb will distribute 377 million KRW across 124 cases. These compensations are under final discussions, and the total may slightly increase upon conclusion of these talks.

Regulatory and Compliance Issues Facing the Exchanges

South Korea’s Financial Supervisory Service (FSS) has intensified its scrutiny of the exchanges, especially after the disruptions late last year. The FSS is focussed to ensure that both platforms fulfill their commitments to upgrade server capacities and enhance emergency response protocols. Additionally, regulators are focusing on Upbit for potential violations of anti-money laundering rules and shortcomings in its customer verification processes.

The Financial Intelligence Unit (FIU) has recently issued a notice to Upbit, potentially suspending its operation for up to six months. Even though existing customers could continue trading, a suspension could prevent the exchange from adding new users. Upbit must respond to these allegations by January 20 to avoid suspension.

South Korea’s Crypto Regulation Outlook

Financial authorities have emphasized the need for robust institutional frameworks to protect investors following these challenges in South Korea’s cryptocurrency market. The authorities have urged exchanges to take practical measures, such as server expansions and improved business continuity planning, to prevent future failures. 

These developments underscore the growing challenges in a rapidly changing digital asset marketplace, highlighting the critical balance between innovation and user protection in the fintech sector.