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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] South Korean cryptocurrency exchange Bithumb has triggered controversy over the legal limits of an exchange’s authority over client assets after directly restricting user accounts to recover mistakenly issued bitcoins.
According to industry sources, Bithumb moved to freeze trading and withdrawals from affected customer accounts immediately after discovering the erroneous distribution of about 620,000 bitcoins on August 6. The exchange deleted unsold bitcoins from its internal ledger and recovered assets that remained within its system, while excluding amounts that had already been sold and converted to cash.
Bithumb said the action did not constitute arbitrary disposal of customer assets but rather a correction of accounting records, arguing that the bitcoins never existed on-chain and were created solely due to a system error. From the exchange’s perspective, removing the entries amounted to restoring its internal ledger to its original state.
The incident has drawn sharp contrast with traditional banking practices. In the banking sector, even mistaken transfers generally cannot be reversed without customer consent or a court order, as deposits are governed by creditor-debtor relationships between banks and account holders.
Cryptocurrency exchanges, however, operate under user agreements. Bithumb cited a clause in its terms of service allowing the platform to recover or restore assets transferred due to system errors after notifying the user. Critics argue that such provisions grant exchanges sweeping powers over customer accounts, effectively allowing them to exercise quasi-ownership rights over client assets.
A financial industry official said the structure raises concerns, noting that “it is problematic for an exchange to wield near-proprietary control over customer assets.”
For bitcoins that had already been sold, Bithumb is reportedly contacting users individually to negotiate voluntary returns. A total of 86 users are known to have sold the mistakenly issued bitcoins, with some having liquidated assets worth roughly KRW 30 billion.
The case is fueling broader debate over investor protection and the need for clearer legal standards governing asset custody and recovery in cryptocurrency exchanges.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
