South Korea is preparing to tighten its oversight of the cryptocurrency market, signaling a tougher regulatory approach aimed at reducing market manipulation and improving consumer protection. The move comes amid growing concerns about trading practices, technological risks, and recent incidents that highlighted vulnerabilities within the digital asset sector.
The country’s financial watchdog, the Financial Supervisory Service (FSS), outlined its plans in its annual policy agenda released on Monday. According to a report by Yonhap News Agency, the agenda places a strong focus on closer monitoring of high-risk behavior in the crypto market, alongside stricter penalties for financial institutions involved in IT-related failures.
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As part of its expanded supervision, the FSS said it will launch targeted investigations into activities that disrupt fair market order. These include price manipulation by large-scale traders, often referred to as “whales,” whose trades can significantly sway token prices. Regulators are also looking closely at cases where prices are artificially pushed up for tokens whose deposits or withdrawals have been temporarily halted on certain exchanges.
Other practices under review include rapid price-pumping schemes, the use of automated application programming interface (API) orders to manipulate markets, and the spread of misleading or false information through social media channels. Authorities view these tactics as harmful to market integrity, particularly for retail investors who may lack access to timely or accurate information.
The regulatory push follows a recent high-profile incident involving Bithumb, South Korea’s second-largest cryptocurrency exchange. During a promotional event, the exchange mistakenly transferred 620,000 bitcoin to hundreds of users, an error valued at approximately $44 billion at the time. While Bithumb later said it had recovered about 99.7 percent of the funds, the incident raised serious questions about internal controls and technological safeguards at major trading platforms.
Beyond crypto-specific supervision, the FSS also plans to introduce punitive fines for IT infrastructure failures across the broader financial sector. These measures are intended to hold firms accountable for system errors that could expose customers to financial losses or disrupt market stability.
In parallel, the watchdog has formed a dedicated task force to prepare for the rollout of the Digital Asset Basic Act, a key piece of legislation that represents the second phase of South Korea’s crypto regulatory framework. The task force will focus on building disclosure standards for token issuance and exchange listings, as well as developing licensing review guidelines for digital asset service providers and stablecoin issuers.
According to Yonhap, the final version of the Digital Asset Basic Act is expected in the first quarter of this year. Once implemented, the law is likely to play a central role in shaping how cryptocurrencies and related services operate in one of Asia’s most active digital asset markets.
South Korea’s latest regulatory plans reflect a broader global trend toward stricter oversight of cryptocurrencies as governments seek to balance innovation with investor protection. By addressing market manipulation, technological risks, and regulatory gaps, authorities aim to create a more transparent and resilient environment for digital assets.
As the new measures take shape, market participants will be watching closely to see how they affect trading practices, exchange operations, and investor confidence in the months ahead.
