- South Korea plans stricter crypto oversight in 2026 to curb manipulation and protect traders after recent exchange issues.
- Regulators will use automated surveillance and AI tools to detect abnormal trading patterns and coordinated misinformation.
- Exchange incidents at Bithumb and Upbit pushed authorities to tighten controls and prepare the Digital Asset Basic Act.
South Korea’s financial watchdog(FSS) is tightening oversight of the cryptocurrency market as it prepares the next regulatory phase. Authorities want to reduce market abuse and improve stability across domestic exchanges.
Recent trading incidents pushed regulators to act with greater urgency. Officials now plan closer supervision of high-risk trading behavior.
Heightened Focus on Price Manipulation
The Financial Supervisory Service plans targeted investigations into suspected crypto price manipulation starting in 2026. The agency will focus on trading behavior that disrupts market order. This includes coordinated trades that create artificial price movements. It also includes activity by large traders that causes sudden volatility. In addition, regulators will examine schemes that exploit deposit or withdrawal suspensions.
These situations can trap token supply on one platform. As a result, prices can move sharply without broader market support. Authorities view this practice as a serious market risk. The watchdog will also review rapid price spikes during short exchange outages. These spikes often mislead retail traders. Therefore, officials plan focused probes into such patterns.
Expanded Surveillance and Automated Tools
Alongside investigations, the watchdog will strengthen market surveillance systems. The agency will analyze abnormal price movements at very short intervals. It will also build tools that flag suspicious trading zones and related accounts. Moreover, regulators will apply text analysis to track coordinated misinformation. These efforts will target manipulation using market-order APIs and online coordination.
Earlier this month, the watchdog expanded artificial intelligence tools for crypto monitoring. Consequently, officials reduced reliance on manual reviews. Faster detection should improve enforcement outcomes. Regulators expect technology-driven oversight to close gaps used by manipulators. These systems will support earlier intervention during market stress.
Exchange Incidents Drive Regulatory Urgency
Recent exchange incidents increased pressure on regulators to act. Over the weekend, Bithumb reported recovery of 99.7% of excess Bitcoin credited during a promotional error. The exchange said no customer assets were lost. However, the error caused brief price volatility. It also led to compensation for affected users.
Following the incident, the Financial Services Commission held an emergency inspection meeting. The meeting included the Financial Supervisory Service and other agencies. Officials ordered a broad review of internal controls at domestic exchanges. Separately, regulators reviewed sharp price movements in the ZKsync token during maintenance on Upbit.
The watchdog said it may open a formal investigation after further analysis. Upbit operator Dunamu has confirmed cooperation with regulatory requests. Last year, South Korea announced plans to introduce new rules holding crypto exchanges to the same liability standards as banks.
In parallel, the watchdog formed a task force to prepare for the Digital Asset Basic Act. The law represents the second phase of South Korea’s crypto framework. The task force will focus on implementation planning. Its work covers disclosure rules and exchange oversight. It also includes licensing standards for digital asset firms.
Authorities also plan tougher penalties for IT failures across financial institutions. These steps aim to protect market integrity and strengthen consumer confidence. Additionally, in 2024, South Korea FSS banned ETFs tied to crypto firms like Coinbase, citing strict 2017 regulations and investor protection.
