Bithumb Faces Sanctions Review as Korean Regulators Target Erroneous Bitcoin Payments

VADODARA, February 10, 2026 — South Korean financial authorities are actively considering sanctions against cryptocurrency exchange Bithumb following a significant erroneous payment incident, according to a Newsis report. This latest crypto news reveals regulators plan to apply the existing Virtual Asset User Protection Act aggressively, despite the absence of comprehensive digital asset legislation. Financial Supervisory Service Governor Lee Chan-jin confirmed authorities are assessing whether the incident violates current user protection laws, with individuals who knowingly sold mistakenly distributed Bitcoin potentially facing unfair trading charges.

Investigation: The Bithumb Erroneous Payment Incident

According to financial industry sources cited by Newsis, the incident involved a large-scale erroneous Bitcoin distribution on the Bithumb platform. Governor Lee Chan-jin stated at a recent meeting that authorities are examining specific aspects of the event for potential violations. The intentional mass-selling of these erroneously sent Bitcoin units is viewed as an act that caused price declines and harmed other investors. Consequently, this action could be defined as unfair trading under the Virtual Asset User Protection Act.

Market structure suggests this represents a liquidity grab event, where erroneous transactions created temporary market inefficiencies. The regulatory focus appears to be on user behavior following the technical error rather than solely on exchange infrastructure failures. This creates a complex liability scenario where users might face charges for capitalizing on exchange errors.

Market Context & Historical Precedent

Historically, South Korea has maintained one of the most stringent regulatory environments for cryptocurrency exchanges. The 2021 implementation of the Virtual Asset User Protection Act marked a significant shift toward formal oversight. In contrast to jurisdictions with more established frameworks, South Korea's approach remains reactive rather than proactive. This incident mirrors previous exchange errors at platforms like Coinbase and Binance, where technical glitches led to temporary market distortions.

Underlying this trend is the broader challenge of applying traditional financial regulations to blockchain-native events. The Bithumb case represents a test of how regulators interpret "unfair trading" in decentralized systems where transaction finality is typically irreversible. This regulatory scrutiny occurs alongside other significant developments in the crypto legal , including the ongoing FTX legal proceedings and concerns about market stability as highlighted by analysts urging MicroStrategy to pause Bitcoin purchases.

Technical Architecture & Regulatory Framework

The Virtual Asset User Protection Act serves as South Korea's primary regulatory instrument for cryptocurrency markets. According to the Financial Services Commission's official documentation, the act focuses on consumer protection, market integrity, and anti-money laundering measures. However, the legislation lacks specific provisions for handling technical errors in automated trading systems. This regulatory gap forces authorities to apply existing unfair trading provisions to novel scenarios.

From a technical perspective, erroneous transactions on blockchain networks create permanent, immutable records. Unlike traditional banking systems where transactions can be reversed, blockchain settlements are typically final once confirmed. This fundamental architectural difference complicates regulatory responses. The Bithumb case tests whether users can be held liable for exchange-side technical failures, potentially establishing precedent for future incidents.

By The Numbers

Why It Matters

This regulatory action matters because it establishes precedent for liability distribution between exchanges and users during technical failures. Market structure suggests that if users become liable for exchange errors, it could significantly alter risk calculations for active traders. Institutional liquidity providers might reconsider South Korean market exposure if regulatory uncertainty increases compliance costs. , this case tests the boundaries of existing legislation not designed for blockchain-specific scenarios.

On-chain data indicates that exchange errors typically create temporary Fair Value Gaps (FVGs) that sophisticated traders exploit. The regulatory response seeks to penalize this exploitation, potentially creating a chilling effect on market efficiency. This development occurs amid broader market stress, as evidenced by Robinhood's 38% crypto revenue decline during the current extreme fear environment.

Expert Commentary

"The Bithumb case represents a critical test of regulatory adaptability. Authorities are attempting to apply traditional market manipulation concepts to blockchain-native events. This creates inherent tension between technological reality and legal frameworks. The outcome could influence how global regulators approach similar incidents, potentially setting international precedent for user liability during exchange failures." — CoinMarketBuzz Intelligence Desk

Market Outlook & Price Scenarios

Market structure suggests two primary scenarios based on regulatory outcomes and technical levels. The immediate price action around $68,000 serves as a critical indicator of market resilience amid regulatory uncertainty.

• Bullish Invalidation Level: $72,500. A sustained break above this resistance would indicate market absorption of regulatory risk and potential continuation of the broader uptrend. This level corresponds with the 50-day moving average and previous order block resistance.
• Bearish Invalidation Level: $65,000. A breakdown below this support would confirm weakening market structure and potentially trigger further liquidation cascades. This level represents the 0.786 Fibonacci retracement from recent highs and a significant volume profile node.

The 12-month institutional outlook depends heavily on regulatory clarity. If authorities establish predictable frameworks for handling technical errors, institutional participation could increase despite short-term volatility. However, prolonged uncertainty might drive liquidity to jurisdictions with more established legal precedents. The broader 5-year horizon suggests increasing regulatory sophistication as authorities gain experience with blockchain-specific scenarios.