The head of South Korea’s financial watchdog is stepping up oversight of the cryptocurrency market, days after a local exchange mistakenly distributed billions of dollars worth of bitcoin to users.
The Financial Supervisory Service announced on Sunday that it would launch a systematic investigation into “high-risk” conduct by so-called whales that undermines market order, including large-scale price manipulation, trading schemes that suspend deposits and withdrawals, and systematic pumping tactics fueled by misinformation on social media.
The watchdog also said it plans to build tools to automatically extract suspicious trading patterns by the second or minute, alongside a text analysis system using artificial intelligence to warn of potential market abuse.
The announcement follows a widely publicized exchange error last week in which some users of Bithumb, one of the country’s largest exchanges, mistakenly received at least 2,000 Bitcoin each instead of a small promotional reward, a debacle that was estimated at the time to be worth around $44 billion.
BTC prices fell by 30% compared to the global average at the time as some recipients attempted to sell their assets. The exchange restricted trading and withdrawals for 695 affected customers within 35 minutes of Friday’s false delivery.
The regulator said the incident exposed the “vulnerabilities and risks” of virtual assets and indicated that it may conduct on-site inspections of exchanges if irregularities are found in internal control systems.
Beyond market manipulation, the FSS said it will introduce punitive fines for IT incidents across the financial sector and increase security responsibilities for chief executives and chief information security officers, changes that could directly impact crypto trading platforms.
The agency also confirmed that it has established a preparatory team for the Digital Asset Basic Act, which will expand South Korea’s regulatory framework beyond the first phase of cryptocurrency regulations.
The crackdown plan reflects a broader push by President Lee Jae-myung to root out what he calls “cruel financial practices,” with the FSS also outlining measures to tighten enforcement against fraud and expand tools to combat voice phishing.