South Korean cryptocurrency exchanges Upbit and Bithumb have agreed to pay out the largest compensation in the country’s crypto history following system failures caused by the declaration of martial law in December. According to reports from Korean news agency Yonhap, the two exchanges will collectively compensate users with over 3.5 billion won (approximately $2.5 million).
Upbit is set to compensate over 3.14 billion won for 596 cases, while Bithumb will pay 377 million won for 124 cases. Both exchanges are currently finalizing talks with users, and the final payout amount may increase slightly. The system failures occurred when the sudden announcement of martial law led to a significant increase in traffic on the platforms. Upbit experienced 99 minutes of downtime as its user count surged from 100,000 to over 1.1 million, while Bithumb faced 62 minutes of disruption.
During the system failures, some users were unable to trade or withdraw funds, resulting in losses as the price of Bitcoin dropped. Financial authorities are closely monitoring how the exchanges are implementing promised upgrades, such as larger servers and improved emergency plans. A Financial Supervisory Service official stated that they are ensuring exchanges adhere to these changes and effectively handle user complaints.
In addition to the compensation for system failures, Upbit is also facing scrutiny over alleged money laundering issues. The Financial Intelligence Unit warned Upbit in January that it could face a suspension of up to six months for failing to meet KYC (Know Your Customer) and AML (Anti-Money Laundering) rules. The exchange has until January 20 to respond to the claims made by the FIU.
Regulators in South Korea are continuing to investigate Upbit and are putting pressure on the cryptocurrency industry to enhance its compliance measures. The industry is also facing the challenge of drafting new regulations, with South Korea expected to introduce a new crypto regulation bill by the end of the year.
Overall, the compensation payout by Upbit and Bithumb for the system failures during martial law highlights the importance of ensuring the stability and security of cryptocurrency exchanges, as well as the need for strict regulatory oversight in the industry.