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In a major development, South Korea’s top cryptocurrency exchanges, Upbit and Bithumb, have reached an agreement to compensate users roughly $2.4 million for service interruptions that occurred during the chaotic events of December 3, 2024. 
Revealed Compensation Details
It was Democratic Party lawmaker Kim Hyun-jung who revealed on January 22 that Upbit will pay out 3.14 billion won (approximately $2.19 million) to compensate for 596 individual cases of system failures that took place on the day later known as “Martial Law Day.” Bithumb will be distributing 377 million won ($263,000) for 124 other cases. So far, these payouts are the largest domestic exchange compensation efforts.
The Crypto Decimation — Dec. 3rd
The turmoil began with a television address President Yoon Suk Yeol gave in which he declared martial law, citing threats posed by “North Korea’s communist forces” and the need to “eliminate anti-state elements.” (Cointelegraph) The announcement caused an immediate drop in Bitcoin value on South Korean platforms, with prices crashing to 115 million won ($90,610) and, in some places, down to 88 million won ($61,352).
The abrupt shift in market conditions led to a spike in trading volume, resulting in significant technical difficulties for platforms such as Upbit and Bithumb, which included log-in access issues and transaction execution glitches.
Increased Regulatory Scrutiny and Measures Ahead
After this situation, the Financial Supervisory Service (FSS) launched on-site inspections of the affected exchanges starting on January 20. The FSS criticized exchanges for not having enough countermeasures against DDos attacks and required them to submit detailed reports on their methods of expanding server capacities, utilizing cloud services, and emergency response measures. The regulator also reiterated the need to set up a robust institutional framework for investor protection, noting the rapid increase in virtual asset investors in South Korea.
Discussions Still Underway and Maybe More Cash Increases
Lawmaker Kim’s office said the total compensation amount could go up slightly as pending negotiations are completed. While the compensation numbers are unprecedented, some critics suggest the current measures will still not suffice in adequately protecting investors. They emphasize that each exchange is independently determining compensation amounts rather than working together on a collective approach.
Market Impact, Recovery & Potential Future Outlook
Cryptocurrency markets were not the only ones impacted by the political chaos, however. The South Korean won was also under pressure, with the won-dollar exchange rate hitting as high as 1,422 won at 11:30 p.m. on December 3, 18 won (1.28%) higher than the previous day’s closing figure. (조선일보) Furthermore, South Korean exchanges achieved a trading volume of over $34 billion in just 24 hours, setting a new record for 2024.
({The Block)[https://www.theblock.co/post/329393/south-koreas-short-lived-military-rule-sparks-record-34-billion-in-local-crypto-trade?utm_source=chatgpt.com]}Once the situation calmed down, the price of Bitcoin returned to its red zone, and the volume of transactions stabilized.
Crypto Stability Lessons
The events of December 3 are a stark cautionary tale about political stability and financial markets. Proactive measures taken by Upbit and Bithumb to compensate users affected by the breaches, as well as regulatory responses, highlight the need for the cryptocurrency sector to maintain strong infrastructure and contingency strategies amid rapid developments.
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FAQs
1. So why are Upbit and Bithumb compensating users?
They are compensating users for system outages experienced on December 3, 2024, which were due to a Bitcoin crash and trading surges in the wake of South Korea declaring martial law.
2. How much compensation did Upbit and Bithumb offer?
As a result, Upbit compensated $2.19 million for 596 cases, and Bithumb compensated $263,000 for 124 cases, for a total of $2.4 million to affected users.
3. Causes of the Bitcoin crash in South Korea?
The declaration of martial law in South Korea leads to panic selling, market strife, and a steep increase of trade volumes in local exchanges, sending Bitcoin’s price diving.
4. What are regulators doing about all this?
To help prevent another system breakdown during fast-moving market events, regulators are pushing exchanges to upgrade server capacity, sharpen emergency protocols,, and strengthen investor protection measures.
