Bithumb license renewal faces prolonged delay amid bitcoin misallocation scandal
Prices of cryptocurrencies, including bitcoin, are displayed at Bithumb Lounge in Gangnam District, Seoul, Tuesday. Yonhap
Bithumb’s license renewal is likely to face a prolonged delay after the cryptocurrency exchange mistakenly distributed 620,000 so-called “ghost” bitcoins, triggering regulatory scrutiny, according to financial authorities and industry officials Friday.
Under the Act on Reporting and Use of Certain Financial Transaction Information, virtual asset service providers are required to renew their registration every three years.
The country’s second-largest coin exchange has remained in provisional operating status since its license expired in December 2024. The firm applied for a renewal of its business registration in October 2024, and the review process is still underway.
Financial authorities had aimed to conclude Bithumb’s renewal review within the first half of this year. That timeline, however, has been thrown into doubt following the recent bitcoin misallocation incident.
On Feb. 6, the exchange attempted to distribute bitcoin worth 2,000 won ($1.40) to participating users as part of a promotional event, but an employee mistakenly entered 2,000 BTC, leading to the erroneous transfer of 620,000 bitcoins in total.
Following the unpredecented incident, the Financial Supervisory Service (FSS), the country’s financial watchdog — which had already conducted an on-site review of the exchange — announced a full-scale inspection, concluding that the case pointed to broader internal control weaknesses rather than a simple clerical mistake.
The Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC), which has the final say over license approvals, has said it is premature to decide on the renewal while a inspection remains ongoing.
Still, officials acknowledge that existing law offers limited grounds for rejecting the application.
The statutory conditions for rejection are limited to specific circumstances, such as failure to obtain information security certification, failure to use real-name-verified bank accounts or convictions related to anti-money laundering or counterterrorism financing within the past five years.
While the incident has undermined confidence in the virtual asset market, it does not clearly satisfy the legal criteria for disqualification.
“If the statutory grounds for rejection are not met, withholding approval could itself constitute a legal violation,” a FSC official said.
Financial Supervisory Service Governor Lee Chan-jin speaks during an emergency inquiry at the National Assembly’s National Policy Committee, Wednesday, over the massive bitcoin misallocation incident at Bithumb. Yonhap
Nevertheless, market observers believe authorities may keep the renewal decision on hold until Bithumb outlines credible measures to restore investor trust.
Even before the latest controversy, Bithumb’s relationship with financial authorities had been strained. The exchange was excluded from a high-profile meeting last September between FSS Governor Lee Chan-jin and crypto exchange CEOs, amid criticism that it had continued to offer coin lending services and share order books with overseas platforms despite regulatory warnings.
It was also reportedly left out of recent closed-door discussions on corporate crypto investment guidelines.
“The license renewal review for Bithumb is unlikely to be finalized in the near term,” another FSC official said.
At a parliamentary hearing on the incident Wednesday, FSS Governor Lee said, “We will take the full circumstances into account before reaching a conclusion, though the ultimate decision rests with the FIU.”
Meanwhile, Bithumb can continue its operations even if the review process is prolonged. Under the current legal framework, when a provider’s license expires during the renewal examination, the validity of the registration is effectively maintained until the regulator issues their final approval notice.