South Korea’s Financial Supervisory Service (FSS) is intensifying its oversight of the cryptocurrency market following a significant error by a major local exchange. The announcement comes in the wake of a mishap wherein Bithumb, one of the country’s largest cryptocurrency exchanges, mistakenly credited users with at least 2,000 bitcoins each instead of the intended smaller promotional rewards, causing a disturbance worth approximately $44 billion.
In its latest statement, the FSS outlined plans for comprehensive investigations into high-risk trading practices that undermine market integrity. These investigations will specifically focus on large-scale price manipulation orchestrated by major investors, often referred to as “whales,” as well as trading schemes linked to suspended deposits and withdrawals. Additionally, the watchdog is keen on addressing coordinated market manipulation tactics that lever social media misinformation to inflate prices artificially.
To bolster its monitoring capabilities, the FSS stated it will develop advanced tools designed to automatically detect suspicious trading patterns with minute-by-minute precision. They also aim to implement text-analysis systems powered by artificial intelligence to identify potential market abuses effectively.
The urgency of these measures has been highlighted by recent events involving Bithumb. Following the erroneous distribution of bitcoin, the cryptocurrency’s price plummeted by 30% compared to the global average as many fortunate recipients attempted to liquidate the assets. The exchange moved quickly to restrict trading and withdrawals for the 695 users affected by the error, implementing these measures within just 35 minutes of the mistake.
Regulators have pointed out that this incident underscores the vulnerabilities and risks associated with virtual assets, prompting discussions about potential on-site inspections of exchanges. These inspections would occur if irregularities are detected within the internal control systems of these platforms.
In addition to addressing market manipulation, the FSS is also exploring the introduction of punitive fines for IT-related incidents across the financial sector. This initiative aims to heighten the security accountability of executives, particularly chief executives and chief information security officers, marking a significant shift in regulatory expectations for crypto trading platforms.
Furthermore, the FSS revealed the establishment of a preparatory team for the Basic Digital Asset Act, which seeks to expand South Korea’s regulatory framework beyond its initial phase of cryptocurrency regulations. These forthcoming legislative efforts align with President Lee Jae-myung’s broader commitment to eliminate what he describes as “cruel financial practices,” thereby enhancing enforcement against fraud while expanding tools to combat voice phishing and other financial crimes.
