South Korea’s top financial watchdog is stepping up oversight of cryptocurrency markets days after a local exchange mistakenly distributed billions of dollars worth of bitcoin to users.
The Financial Supervisory Service said 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 create tools that automatically extract suspicious trading patterns by the second and minute, along with text analysis systems that use artificial intelligence to detect 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 in lieu of small promotional rewards, an error estimated at approximately $44 billion at the time.
BTC prices fell by 30% compared to the global average at the time as some recipients attempted to sell the assets. The exchange had restricted trading and withdrawals for all 695 affected clients within 35 minutes of the erroneous distribution on Friday.
Regulators said the incident exposed the “vulnerabilities and risks” of virtual assets and noted that they could conduct on-site inspections of exchanges if irregularities in internal control systems are found.
Beyond market manipulation, the FSS said it will introduce punitive fines for IT incidents across the financial sector and increase security responsibility for CEOs and chief information security officers, a change that could have direct implications for cryptocurrency trading platforms.
The agency also confirmed that it has created 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 plan reflects a broader push by President Lee Jae-myung to root out what he has called “cruel financial practices,” and the FSS also outlines measures to strengthen anti-fraud law enforcement and expand tools to combat voice phishing.
