[Editorial] 'Ghost coins'

An unprecedented financial mishap unfolded at Bithumb, South Korea’s second-largest cryptocurrency exchange, where bitcoins valued at around 60 trillion won ($40.98 billion) were mistakenly distributed.

It is alarming that a digital currency exchange was able to electronically manufacture and circulate bitcoins far in excess of the assets it actually held.

On Friday, a clerical error at Bithumb turned a modest promotional payout into a staggering mistake. An employee entered the wrong payment unit, resulting in 620,000 bitcoins being credited to prize winners instead of the intended 620,000 won.

With bitcoin trading at around 98 million won per coin at the time, the mistaken payout ballooned to about 62 trillion won.

Bithumb detected the error only after 20 minutes and froze trading and withdrawals 15 minutes later.

However, before controls were fully in place, some recipients sold the mistakenly credited bitcoins on the platform.

This triggered a sharp, localized plunge in bitcoin prices on Bithumb, briefly pushing prices more than 10 percent below prices on other domestic exchanges.

Investors were blindsided, watching the value of their holdings suddenly evaporate without knowing why.

What started as a clerical mistake ultimately exposed the crypto market’s opaque and fragile infrastructure, fundamentally shaking confidence in virtual currencies.

The core problem is how Bithumb was able to credit customer accounts with vast amounts of bitcoins it did not have. On its internal systems and without passing through any control mechanisms, the exchange issued more than 14 times the amount of bitcoins it actually held — about 41,000 coins as of September last year. In reality, the exchange’s own balance sheet showed holdings of just 175 bitcoins.

What the incident laid bare was a structural flaw that let the exchange create bitcoins at will, despite lacking the underlying assets. In effect, the system allows so-called “ghost coins” to pour into the market without limit.

This was made possible by a systemic failure. No matter how many coins were actually in the vault, an employee’s keystrokes on the computer ledger were instantly recognized as real assets.

Financial authorities should put in place structural safeguards that prevent any mismatch between internal ledgers and real assets from arising at the source.

The cryptocurrency market now counts more than 8 million registered users and sees as much as 20 trillion won change hands each day. Yet something occurred that would be unthinkable in a traditional bank.

Financial authorities should not stop at identifying a clerical error. They must examine how such vast amounts of bitcoins could be generated so easily, why internal controls failed, and what measures are needed to prevent a repeat.

The Bithumb incident was sparked by a simple human error. If exploited maliciously, however, the same systemic weaknesses could spiral into a crisis that engulfs the entire market.

Authorities should not assume this is an isolated case; they must determine whether similar flaws could allow ghost assets to be generated and distributed across other cryptocurrency exchanges.

In the stock market, core functions are divided among separate institutions: securities firms broker trades, the Korea Exchange operates the market, and the Korea Securities Depository handles custody and settlement.

By contrast, cryptocurrency exchanges monopolize trading, custody, and settlement, a concentration of roles that leaves the market structurally fragile and prone to accidents.

If transparency and safety in cryptocurrency trading are to be meaningfully improved, custody and settlement functions need be separated from exchanges, and internal control mechanisms must be reinforced.

Without an external oversight system, a second “ghost coin” incident could easily occur. Financial regulators must significantly reinforce oversight and monitoring of exchange operations to prevent systemic failures. The responsibility borne by supervisory authorities is heavy.