South Korea’s top financial watchdog is stepping up oversight of crypto markets days after a local exchange mistakenly distributed billions of dollars worth of bitcoin to users.
The financial watchdog said on Sunday it will launch planned investigations into “high-risk” practices that undermine market order, including large-scale price manipulation by so-called whales, trading schemes linked to suspended deposits and withdrawals and coordinated pumping tactics fueled by misinformation on social media.
The watchdog also said it plans to build tools that automatically extract suspicious trading patterns by the second and minute, along with text analysis systems that use artificial intelligence to flag potential market abuse.
The announcement follows a widespread exchange error last week in which some users of Bithumb, among the country’s largest exchanges, were mistakenly credited with at least 2,000 bitcoins each instead of small promotional rewards, a blunder estimated at about $44 billion at the time.
BTC prices fell 30% compared to the global average at the time as some receivers tried to sell the assets. The exchange had limited trading and withdrawals for the 695 affected customers within 35 minutes of the erroneous distribution on Friday.
Regulators said the incident exposed the “vulnerabilities and risks” of virtual assets and signaled they could conduct on-site inspections of exchanges if irregularities in internal control systems are found.
In addition to market manipulation, the FSS said it will introduce fines for IT incidents across the financial sector and increase security responsibilities for chief executives and heads of information security, a shift that could have direct implications for crypto trading platforms.
The agency also confirmed that it has set up a preparatory team for the Basic Digital Asset Act, which would expand Korea’s regulatory framework beyond the first phase of crypto regulations.
The crackdown reflects a broader push by President Lee Jae-myung to stamp out what he has called “cruel economic practices,” with the FSS also outlining measures to strengthen fraud enforcement and expand tools to combat vote phishing.
