South Korea's FSS Threatens Bithumb with Maximum Penalty, License Sanctions

VADODARA, February 9, 2026 — South Korea's Financial Supervisory Service (FSS) Governor Lee Chan-jin has declared Bithumb's erroneous payment incident a "disaster." He signals maximum penalties and potential license sanctions. This latest crypto news injects regulatory uncertainty into an already fragile market. According to NewsPim, the governor emphasized a sweeping investigation into "ledger trading." This practice involves trading un-held crypto assets.

Investigation: FSS Targets Bithumb's Ledger Trading Practices

Governor Lee Chan-jin's statement targets Bithumb's operational integrity. He called for a comprehensive probe into ledger trading. Market structure suggests this indicates systemic risk. The FSS will apply all possible penalties under current law if illegal negligence is found. , a pending digital asset framework bill could introduce severe regulations. These may include sanctions on Bithumb's operating license. Consequently, the exchange's business viability faces direct threat.

Market Context & Historical Precedent

Historically, South Korean exchanges have faced intense regulatory scrutiny. The 2021 Upbit investigations set a precedent. In contrast, the current FSS stance appears more aggressive. Underlying this trend is a global shift toward stricter compliance. The recent challenge by Upbit operator Dunamu against a $26.5 million fine highlights ongoing tensions. This Bithumb case could establish a new enforcement benchmark. It mirrors broader regulatory tightening seen in the U.S. and EU.

Related Regulatory Developments

• FDIC loses lawsuit over crypto 'pause letters,' marking a transparency win.
• Fed chair confirmation stalemate sparks market uncertainty.

Technical Architecture & Price Action

On-chain data indicates increased selling pressure on Korean exchanges. The Bithumb news creates a liquidity grab scenario. Bitcoin's current price at $70,805 acts as a critical market proxy. A break below the Fibonacci 0.618 support at $68,200 would confirm bearish momentum. , RSI readings show oversold conditions across major pairs. This suggests potential for a short squeeze if regulatory fears ease. However, the Extreme Fear sentiment score of 14/100 reflects deep market anxiety. Order block analysis reveals weak bid support on Bithumb's order books.

By The Numbers

Why It Matters

This regulatory action matters for institutional liquidity cycles. South Korea represents a major crypto market. A Bithumb shutdown could trigger capital flight. Retail market structure would face immediate disruption. According to on-chain forensic data, Korean exchanges hold significant Bitcoin and altcoin volumes. A license revocation would create a supply overhang. This could depress prices globally. The FSS's official mandate emphasizes financial stability, suggesting prolonged scrutiny.

Expert Commentary

"The FSS's move signals a paradigm shift in Korean crypto regulation. Market participants must price in higher compliance costs and operational risks. Historical cycles suggest such crackdowns precede market consolidation, often creating buying opportunities after initial sell-offs." – CoinMarketBuzz Intelligence Desk

Market Outlook & Price Scenarios

Market structure suggests two primary scenarios. First, a contained regulatory event with Bithumb receiving a fine but retaining its license. Second, a severe outcome with license suspension, triggering broader market contagion.

• Bullish Invalidation Level: Bitcoin breaking above $73,500 would invalidate the bearish regulatory narrative, indicating market absorption of the news.
• Bearish Invalidation Level: Bitcoin falling below $68,200 (Fibonacci 0.618) would confirm regulatory contagion, potentially targeting $65,000 support.

The 12-month institutional outlook hinges on the digital asset framework bill's final text. If passed with harsh terms, Korean exchange viability could diminish. This may shift liquidity to offshore platforms. Over a 5-year horizon, global regulatory harmonization may reduce such jurisdictional risks.