South Korean Crypto Exchanges Conduct Stress Tests for Crises

The surge in global geopolitical instability has turned such crises from anomalies into an expected part of the landscape. Aware of this shift, South Korean regulators and exchanges are developing plans to bolster the system’s robustness.

This was detailed in a report by South Korea’s Money Today, which cited the Financial Supervisory Service.

Activity Explosion — A Moment of Chaos

After martial law was declared, cryptocurrency exchanges experienced an extraordinary influx of users. According to Kim Hyun-joon of the Democratic Party, simultaneous user numbers on leading platforms surged elevenfold, from the usual 50,000–100,000 to an unprecedented 500,000–1.1 million. The surge exceeded system thresholds, resulting in significant disruptions.

On the “night of the military coup,” crypto exchanges struggled to cope: Upbit reported a 99-minute delay, Bithumb faced 62 minutes of disruption, and Coinone endured 40 minutes of downtime. Withdrawals were nearly impossible. This highlighted a glaring vulnerability in crypto platforms when confronted with external shocks like political turbulence.

December 3 saw political upheaval in South Korea. Source: CNN

The Root of the Market Chaos

South Korea’s financial markets were thrown into turmoil by the martial law declaration, sparking widespread uncertainty. The resulting panic caused Bitcoin’s price to surge to 135 million won before crashing to 88 million won within half an hour of the coup announcement. This volatility sent investors into a frenzy, with some rushing to sell and others scrambling to buy Bitcoin at a perceived bargain.

A colossal wave of trader traffic overwhelmed crypto exchanges, resulting in widespread outages. Even after the lifting of martial law and the recovery of crypto prices, exchange support teams remained swamped with complaints from dissatisfied users.

Cryptocurrency prices plunged after martial law was imposed. Source: businesstoday

Strengthening the Response Framework

After carefully assessing the situation, the Financial Supervisory Service has issued strategic recommendations designed to fortify exchanges against future disruptions. The proposed measures include:

1. Infrastructure Expansion: Upgrading server capacity and refining system architecture to manage increased traffic effectively. This involves optimizing software, databases, and other infrastructure layers, such as migrating to scalable blockchain solutions or integrating cloud technologies.
2. Decentralizing Key Functions: Reducing the risk of system overload by distributing tasks across various servers and platforms. This strategy specifically highlights decentralizing user authentication and registration workflows. 
3. Building Robust Emergency Response Systems: Preparedness plans should enhance communication infrastructure and establish efficient workflows with banks for faster processing of financial requests. Measures might include emergency hotlines for direct communication and comprehensive training materials to guide staff during critical system failures.

In light of escalating geopolitical instability and military threats, South Korean officials assert that crypto exchanges must adapt to abrupt market shifts driven by external factors. Democratic Party members have urged exchange operators to recognize the likelihood of similar scenarios and to focus on strengthening their infrastructure to ensure scalability and resilience.