South Korean Crypto Exchanges to Compensate Users Following System Failures

South Korean crypto exchanges Upbit and Bithumb have agreed to compensate users for technical failures that occurred during the martial law declaration in December. The combined payout of over 3.5 billion won (around $2.5 million) marks the largest compensation in South Korea’s crypto history.

System Failures During Martial Law Declaration

The system failures occurred when the sudden martial law announcement caused a huge traffic spike. Upbit’s user count jumped from 100,000 to over 1.1 million, causing 99 minutes of downtime. Bithumb wasn’t immune either, with 62 minutes of disruption. During the incident, some users couldn’t trade or withdraw funds, resulting in significant losses as Bitcoin’s price dropped.

Payout Details and User Compensation

According to reports, 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 finalizing talks with users, meaning the final payout might increase slightly.

Tips for crypto investors to minimize losses during system failures:

  • Diversify your investments across multiple exchanges to minimize risk.
  • Stay informed about market conditions and potential disruptions.
  • Have a backup plan in place in case of system failures.

Regulatory Pressure and Compliance

Financial authorities are keeping an eye on how exchanges are following through with their promised upgrades, such as bigger servers and better emergency plans. A Financial Supervisory Service official said they’re making sure exchanges stick to these changes and properly handle user complaints.

Regulators are also digging into Upbit over alleged money laundering issues, piling on the pressure for the industry to step up its compliance game. The Financial Intelligence Unit warned Upbit it could face a suspension for not meeting Know Your Customer (KYC) and Anti-Money Laundering (AML) rules.

“Exchanges must prioritize user safety and compliance to maintain trust in the industry.”

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