South Korea's Financial Services Commission on the 20th announced it is reviewing the introduction of account payment suspension systems and whistleblower reward programs to prevent unfair trading in the virtual asset market. The measures would align digital asset markets with capital market standards by enabling authorities to freeze accounts to prevent concealment of illegal profits and incentivize early detection of violations. The announcement coincided with the second anniversary of the Virtual Asset User Protection Act, which took effect on July 19, 2024, to regulate market manipulation and unfair trading practices in digital assets.
FSC Refers 30+ Cases to Prosecutors in Two-Year Enforcement Period
The Financial Services Commission completed investigations into approximately 40 cases during the two years following the Act's implementation, referring over 30 cases to law enforcement authorities. Market manipulation cases constituted the majority of referrals, with fraudulent trading cases comprising the remainder. The average illicit profit across cases reached 1.4 billion won, with 8 cases involving profits between 500 million and 5 billion won — a threshold triggering enhanced criminal penalties — and 1 case exceeding 5 billion won. A total of 25 suspects were identified across investigations, with an average of 8 tokens involved per case.
The FSC imposed administrative fines on 2 cases — one fraudulent trading case and one market manipulation case — at levels exceeding illicit gains by 125% to 165%.
Market Manipulation Cases Dominate Enforcement Actions
Market manipulation cases involved ultra-short-term schemes exploiting characteristics of digital asset markets, including "race horse" and "herding" tactics, as well as short-term manipulation through API key lending. Authorities also identified cases involving large-scale holders (whales) coordinating activity across overseas exchanges.
Fraudulent trading cases included an issuer disseminating false information via social media to induce trading, and schemes exploiting price linkages between markets within cryptocurrency exchanges. The FSC stated it detected fraudulent trading cases during complaint processing procedures, enabling swift action to prevent widespread victim losses.
FSC Deploys AI-Based Surveillance to Combat Cross-Border Violations
The FSC established an artificial intelligence-based market surveillance and investigation system to enhance enforcement capabilities. The authority stated it took strict action against ultra-short-term manipulation and cross-border manipulation schemes to establish sound market order and actively respond to transnational violations.
Cryptocurrency exchanges have implemented continuous abnormal trading monitoring systems and are progressively upgrading these capabilities, according to the FSC. The authority stated it will mobilize all resources to establish a fair and transparent market order that users can trust, in response to increasingly sophisticated, large-scale, and complex unfair trading in digital assets.
FAQ
What measures is South Korea's FSC reviewing for virtual asset markets?
The Financial Services Commission announced on the 20th it is reviewing the introduction of account payment suspension systems to prevent concealment of illegal profits and whistleblower reward programs to enable early detection of violations in the virtual asset market.
How many virtual asset cases did the FSC investigate under the Virtual Asset User Protection Act?
The FSC completed investigations into approximately 40 cases during the two years following the Act's implementation on July 19, 2024, referring over 30 cases to law enforcement authorities. The average illicit profit reached 1.4 billion won, with 25 suspects identified across cases involving an average of 8 tokens per case.
