South Korea plans stricter crypto rules to curb market manipulation

South Korea's financial regulator announced it will enhance scrutiny of the cryptocurrency market and enforce stricter fines on financial institutions for IT-related issues, in response to prominent events that revealed vulnerabilities to market integrity and consumer protection.

The Financial Supervisory Service (FSS) announced its annual policy agenda on Monday, which encompasses intended investigations into high-risk activities in the cryptocurrency market, as well as the implementation of punitive fines for IT infrastructure deficiencies throughout the financial sector, according to Yonhap news agency.

The FSS announced that it will perform focused investigations into activities that disrupt market order, including price manipulation by significant traders, referred to as “whales,” and strategies such as artificially inflating the prices of tokens whose deposits and withdrawals have been halted on particular exchanges.

South Korea plans stricter crypto rules

The paper indicates that other activities under examination encompass quick price-pumping schemes, market manipulation via application programming interface orders, and the dissemination of incorrect information through social media.

The regulatory action ensues from a recent occurrence at Bithumb, South Korea's second-largest cryptocurrency exchange, which erroneously transmitted 620,000 BTC, valued at around $44 billion, to numerous users during a promotional event on Friday evening, as reported by the BBC. The exchange reported that it has retrieved 99.7% of the erroneously transmitted bitcoin.

The FSS announced the establishment of a task force to facilitate the implementation of the Digital Asset Basic Act, a crucial component of the second phase of cryptocurrency regulation.

The committee will develop disclosure standards for token issuance and exchange listing assistance, along with licensing review guides for digital asset service providers and stablecoin issuers, as reported by Yonhap. The conclusive version of the legislation is expected in the first quarter of this year.