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 Monitoring Service said Sunday it would launch planned investigations into “high-risk” practices that undermine market order, including large-scale price manipulation by so-called whales, trading schemes related to the suspension of deposits and withdrawals, and coordinated pumping tactics fueled by social media disinformation.
The watchdog also announced plans to create tools that can automatically extract suspicious trading patterns down to the second and minute, as well as text analysis systems using artificial intelligence to flag potential market abuses.
The announcement follows a widely reported exchange error last week in which some users of Bithumb, one of the country’s largest exchanges, were mistakenly credited with at least 2,000 bitcoins each instead of small promotional rewards, an error estimated at the time to be around $44 billion.
BTC prices fell 30% compared to the global average at the time as some recipients attempted to sell the assets. The exchange restricted trading and withdrawals for all 695 affected customers within 35 minutes of Friday’s erroneous distribution.
Regulators said the incident exposed the “vulnerabilities and risks” of virtual assets and indicated they could conduct on-site inspections of exchanges if irregularities were found in internal control systems.
Beyond market manipulation, the FSS said it would introduce punitive fines for cyber incidents in the financial sector and increase security accountability for executives and information security officers, a change that could have direct implications for cryptocurrency trading platforms.
The agency also confirmed that it has established a preparatory team for the Basic Digital Assets Law, which would expand Korea’s regulatory framework beyond the first phase of crypto rules.
The crackdown reflects a broader push by President Lee Jae-myung to stamp out what he called “cruel financial practices,” with the FSS also outlining measures to strengthen the fight against fraud and expand tools to combat voice phishing.
