Bithumb under scrutiny over order book sharing with Australian exchange

Bithumb CEO Lee Jae-won attends a meeting between the governor of the Financial Supervisory Service and cryptocurrency exchange CEOs in Seoul, Feb. 7, 2024. / Newsis

Bithumb, Korea’s second-largest cryptocurrency exchange, is under scrutiny by financial authorities after it began sharing its order book with Australia’s Stellar Exchange, raising concerns over potential personal data leaks and money laundering, industry and government officials said Tuesday.

The Financial Intelligence Unit under the Financial Services Commission (FSC), the country’s top financial regulator, plans to summon Bithumb CEO Lee Jae-won for questioning in connection with the issue.

“We are reviewing procedural compliance, and if any breaches of the Act on Reporting and Using Specified Financial Transaction Information are found, appropriate measures will be taken,” an FSC official said.

On Monday, Bithumb announced the launch of a new Tether (USDT) market and notified investors that it would begin sharing its order book with Stellar Exchange.

An order book shows real-time buy and sell orders on an exchange. By sharing it, investors on both platforms can view the same orders and trades, making it easier to match buyers and sellers and potentially boosting trading activity and overall market liquidity.

Despite these potential benefits, financial authorities, citing the special law, enforce strict rules on order book sharing. These include verifying the identities of counterpart exchange customers, ensuring compliance with anti-money laundering obligations and addressing concerns over cross-border personal data transfers.

Bithumb maintains that it followed the necessary procedures. However, authorities reportedly view the company’s submitted reports as insufficiently detailed.

“Implementing systems to verify foreign exchange customers in real-time is challenging in a short timeframe,” a crypto industry insider noted. “With order book sharing, domestic and international transactions are processed together, which increases the risk of money laundering, making it an issue regulators cannot ignore.”

The issue has also sparked discussions across cryptocurrency communities, including on social media platform Telegram. One user commented, “While order book sharing offers convenience, it could create a channel for money laundering via foreign exchanges.”

In response to growing concerns, a Bithumb official said, “We have been preparing for this for a long time and proceeded after thorough consultation with Stellar.”