South Korea’s top financial regulator 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 Authority said on Sunday it would launch a planned investigation into “high-risk” behavior that disrupted market order, including large-scale price manipulation by so-called “whales”, trading schemes linked to suspensions of deposits and withdrawals, and coordinated pump-and-pump tactics fueled by social media misinformation.
The regulator also said it plans to develop tools that can automatically extract suspicious trading patterns on a second-by-second and minute-by-minute basis, as well as text analysis systems that use artificial intelligence to flag potential market abuse.
The news follows a widely reported trading error last week in which some users of Bithumb, one of the country’s largest exchanges, were mistakenly credited with at least 2,000 Bitcoin each instead of small promotional rewards, an error estimated at the time to be worth around $44 billion.
Bitcoin prices fell 30% from 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 the error being posted on Friday.
Regulators said the incident exposed “vulnerabilities and risks” in virtual assets and said they could conduct on-site inspections of exchanges if breaches of internal control systems were found.
In addition to market manipulation, the FSS said it would impose punitive fines for IT incidents across the financial sector and increase the security responsibilities of CEOs and chief information security officers, a shift that could have a direct impact on cryptocurrency trading platforms.
The agency also confirmed that it has established a preparatory group for the Basic Digital Assets Act, which would expand South Korea’s regulatory framework beyond the first phase of cryptocurrency rules.
The crackdown reflects President Lee Jae-myung’s broader campaign to stamp out what he calls “cruel financial practices,” with the Financial Security Bureau also outlining measures to step up enforcement against fraud and expand a crackdown on voice phishing tools.
