The South Korean Financial Supervisory Service announced plans to investigate high-risk practices, including whale manipulation and artificial price inflation, following the Bithumb incident involving the erroneous transfer of $44 billion worth of bitcoin.
The South Korean Financial Supervisory Service announced its annual policy agenda on Monday, which includes plans to strengthen supervision of the cryptocurrency market and impose stricter penalties on financial institutions involved in IT incidents.
This move comes after notable incidents that exposed risks to market integrity and consumer protection, particularly the recent incident at Bithumb, South Korea's second-largest exchange, where it mistakenly transferred 620,000 BTC, equivalent to approximately $44 billion, to hundreds of users during a promotional event, although it later recovered 99.7% of the bitcoin.
The FSS stated that it will conduct targeted inspections of activities that undermine market order, including price manipulation by large-scale traders often referred to as whales, as well as artificial price-pumping tactics for Token whose deposit and withdrawal activities have been suspended on certain exchanges.
Other practices under XEM include rapid price pump schemes, market manipulation through order placement via application programming interfaces, and the dissemination of misinformation via social media, according to Yonhap news agency.
Preparations are underway to enact the Digital Asset Fundamental Act.
The FSS has established a working group to prepare for the enactment of the Basic Law on Digital Assets, a key component of the second phase of crypto asset legislation in South Korea. This group will develop a disclosure framework for Token Issuance and listing support, as well as create a licensing and due diligence manual for digital asset service providers and stablecoin issuers.
The final version of the law is expected to be enacted in the first quarter of this year, reflecting South Korea's efforts to build a comprehensive legal framework to protect investors and maintain transparency in the cryptocurrency market.
This expanded oversight program also includes the application of punitive penalties for IT infrastructure incidents across the financial sector, aiming to enhance the accountability of financial institutions in protecting data and systems.
This approach shows that South Korean regulators are shifting from passive supervision to proactive intervention to prevent market-damaging practices, while simultaneously preparing a solid legal foundation for the sustainable development of the domestic cryptocurrency industry.
