Real-Time Reconciliation and Kill Switches Required for Virtual Asset Exchanges

Press Releases

Real-Time Balance Reconciliation and Enhanced Internal Control Required for Virtual Asset Exchanges Apr 06, 2026
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The Financial Services Commission held a meeting with five major domestic virtual asset exchange service providers and the Digital Asset Exchange Alliance (DAXA) on April 6 to discuss the outcome of inspections carried out in the wake of Bithumb’s erroneous payout incident and to discuss measures for improvement.

At the meeting, the DAXA and the five major virtual asset exchange service providers announced a joint resolution intended to prevent payment accidents in the future and regain trust from the market by upgrading the industry’s self-regulatory framework and strengthening internal control mechanisms.

Inspection Results and Improvement Measures

An emergency response unit was set up in February in the wake of Bithumb’s erroneous payout incident to closely inspect virtual asset exchange service providers for their handling of user assets, vulnerabilities in their operating systems, and internal control mechanisms.

a) Inadequacy in ledger-to-wallet balance reconciliation

Three out of five virtual asset exchange service providers were found to have in place a ledger-to-wallet balance reconciliation process operating on a 24-hour basis, making them incapable of timely responses when an accidental payout takes place.

Additionally, inspections revealed that virtual asset exchange service providers had no adequate preparations for kill switches, which would enable them to immediately halt transactions upon finding a significant gap is the ledger-to-wallet balance reconciliation. Although external verification through accounting firms is taking place on a quarterly basis, information disclosure in this regard is only taking place perfunctorily.

In this regard, virtual asset exchange service providers will be required to set up a ledger-to-wallet balance reconciliation system on a real-time basis (every five minutes) to ensure immediate responses in case a payment accident takes place. Additionally, there will be specific criteria introduced for initiating an automated kill switch when there is a large-scale mismatch in the real-time ledger-to-wallet balance reconciliation process. External verification through accounting firms will be required on a more frequent basis from once every quarter currently to once every month. The scope of disclosed information required will also be expanded to the quantity of virtual assets by type per wallet and per ledger.

b) Improper management over high-risk transactions

Most virtual asset exchange service providers were found to have inadequate risk control and management mechanisms for certain types of high-risk transactions (e.g. reward payouts, etc.) requiring manual input by a staff.

In this regard, there will be enhanced risk prevention and control measures by requiring virtual asset exchange service providers to separately manage high-risk transactions accounts and having them to set up an automated validity check system that can automatically block transactions that do not match the unit and the quantity as initially planned. A cross-check by a third party will also be required at the time of placing an input for payment. Moreover, depending on the amount of payments, different levels of authorization clearance and the requirement for multiple authorization process will be introduced.

c) Inadequacy in internal control mechanisms

Although there is a set of industry-wide internal control standards put forward as a self-regulatory measure, there is currently a lack of compliance control system to monitor and ensure their implementation.

In particular, most virtual asset exchange service providers were found to lack risk management procedures for effectively dealing with emergency situations, human errors, or system failures.

In this regard, to strengthen the internal control system of virtual asset exchange service providers, a standardized internal control compliance program will be newly introduced to bolster oversight on violations, and the inspection period will be shortened from once every year previously to once every six months. The result of inspection will also need to be reported to the financial authority.

To more effectively and systematically respond to the risk management issues in the industry, virtual asset exchange service providers will jointly set up a standardized form of risk management criteria and establish an organizational framework on risk management (e.g. appointment of a risk management officer, operation of a risk management committee, etc.).

Further Plan

The financial authorities and the DAXA plan to complete the rule changes needed to implement the improvement measures within April this year, while making relevant system upgrades to implement the real-time ledger-to-wallet balance reconciliation system by May. To ensure a seamless implementation of these measures, key details of the measures will be adequately incorporated into the currently pending framework law on digital assets.

In the meantime, the Financial Supervisory Service has identified deficiencies in Bithumb’s internal control system in an inspection conducted from February 10 to March 6 and plans to carry out the sanctions process as soon as the legal examination is completed.

• Please refer to the attached PDF for details.

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