Upbit and Bithumb Compensate Customers Amid December Outages
In a significant move for South Korean cryptocurrency trading, Upbit and Bithumb, the nation’s two largest exchanges, have committed to compensating customers approximately $2.4 million due to outages that occurred during the chaotic events surrounding the declaration of martial law on December 3. Reports from Maeil Ilbo indicate that the two exchanges have agreed to settle 720 individual cases impacted by the disruptions.
Details of Compensation Settlements
According to detailed data released on January 22 by lawmaker Kim Hyun-jung, who serves on the National Assembly’s Political Affairs Committee, Upbit has allocated 3,144,598,156 won (about $2,192,550) to compensate 596 customers affected by these outages. These incidents occurred due to severe “computer system failures” that took place on what many in South Korea now refer to as “Martial Law Day.”
Bithumb, on the other hand, will provide 377,533,687 won (approximately $263,273) to 124 customers, marking this as potentially the largest compensation payout ever issued by domestic exchanges. Despite the substantial payouts, critics have raised concerns about the adequacy of protection for investors, suggesting that the exchanges are independently determining compensation amounts rather than collaborating to establish a comprehensive response.
Ongoing Negotiations and Potential Adjustments
Kim’s office has noted that the total compensation figure may increase slightly as final negotiations are underway. The dual approach from both platforms emphasizes a growing recognition of the need to address customer grievances in a tumultuous financial landscape.
Context: The December 3rd Crisis Explained
The fallout from the martial law declaration by South Korean President Yoon Seok-yeol on December 3 sparked a crisis that sent shockwaves through the nation’s cryptocurrency markets. In an immediate response to the announcement, the price of Bitcoin (BTC) plummeted from around 130 million won (approximately $90,610) to 88 million won ($61,352) on local platforms. This sharp decline prompted a wave of panic selling while other investors attempted to capitalize on the dip, leading to an unprecedented surge of traffic on Upbit and Bithumb.
Unfortunately, the influx of users overwhelmed both platforms, resulting in widespread technical failures. Many users found themselves unable to access their accounts, while others faced difficulties executing trades. Upbit, in particular, reported issues that included the cancellation of some crypto withdrawals and difficulties with KRW deposits.
Regulatory Response and Expected Improvements
The outages ignited a firestorm of controversy, prompting financial regulators to conduct on-site inspections at cryptocurrency exchanges starting January 20. The Financial Supervisory Service (FSS) has since requested exchanges to provide thorough reports detailing their future strategies and operational improvements.
The FSS is pushing for exchanges to enhance their server capacities, upgrade cloud services, and refine emergency response plans to avoid similar incidents in the future. This proactive stance reflects the understanding that, as the number of virtual asset investors continues to grow in South Korea, the need for a robust institutional framework for investor protection has never been more critical.
Expert Opinions: A Call for Systematic Change
In an insightful commentary, Kim Hyun-jung asserted, “The number of virtual asset investors is rapidly increasing in South Korea. But we still lack an institutional foundation for investor protection. The financial authorities and exchanges must come together to establish practical and specific measures.” She emphasized the necessity for increased server capacity and improved emergency response processes to safeguard the trading environment and ensure a trustworthy ecosystem for virtual assets.
Future Outlook: Navigating the Path Ahead
As South Korea’s cryptocurrency landscape evolves, the response from exchanges and regulators following this incident will be pivotal in shaping the future of investor trust and operational integrity in the market. The successful implementation of proposed regulatory measures could serve as a blueprint for enhancing investor protection universally, reducing the likelihood of future disruptions and cultivating a more resilient trading environment.