620,000 Bitcoin error underscores urgent need for airdrop regulations in South Korea’s crypto sector
Bithumb, South Korea’s second-largest virtual currency exchange, has faced criticism for a major incident in which 620,000 Bitcoins were mistakenly distributed to users. The accident is attributed to poor management of “airdrops” — a marketing practice where exchanges or virtual currency issuers distribute free tokens to users for promotional purposes. While airdrops are a common marketing tool in the industry, critics highlight the absence of basic regulations, such as quantity limits or account segregation for airdrop management.
According to financial sources on the 9th, Bithumb mistakenly distributed 2,000 to 50,000 Bitcoins to 249 users who participated in an event, instead of depositing 2,000 to 50,000 Korean won. This marked an unintended airdrop of Bitcoins to users.
Exchanges and issuers typically use airdrops when new virtual currencies are listed or during promotional events. For instance, Bithumb airdropped 500,000 NXP Coins (NXPC) to users in May of last year when Nexon’s virtual currency was listed. Another domestic exchange, Korbit, airdropped Rootstock (RIF) tokens in December of last year to members who linked Shinhan Bank accounts and agreed to marketing communications.
The issue in this incident is that Bithumb distributed over 12 times its held Bitcoin volume via airdrops. Since airdrops involve giving away virtual currencies for free, it is standard practice to distribute only the company’s existing holdings. However, Bithumb failed to internally prevent an employee’s error, which led to the creation and distribution of “phantom coins” exceeding its actual holdings.
Analysts argue that the lack of institutional frameworks for airdrop management has resulted in weak internal controls. Currently, no laws regulate internal controls for promotional activities like airdrops, and only the Virtual Currency User Protection Act, focused on user safeguards, exists. This regulatory gap allowed even basic common sense — such as prohibiting airdrops beyond a company’s holdings — to be ignored.
Self-regulatory agreements by the Digital Asset eXchange Alliance (DAXA), a consortium of virtual currency exchanges, also lack specific provisions. While they restrict airdrops involving “abnormal transaction conditions” or “economic value exceeding general expectations,” there are no clauses mandating quantity limits or segregated accounts for airdrop execution.
A virtual currency specialist lawyer stated, “Airdrops, distributed to numerous users, can lead to major accidents if quantities are miscalculated. Exchanges must store airdrop allocations in separate accounts and limit distributions to pre-confirmed quantities. Additionally, multi-step verification systems should be implemented to prevent errors.”
