South Korea to ramp up crypto oversight to curb market manipulation

South Korea is increasing oversight of its cryptocurrency markets in 2026 to combat market manipulation, tighten regulation of trading platforms, and protect investors, following a series of high‑profile incidents that exposed weaknesses in the digital asset ecosystem. 

The Financial Supervisory Service (FSS), the country’s key financial regulator, unveiled a more aggressive crypto oversight strategy in its 2026 work plan released this month, putting artificial intelligence and automated surveillance at the center of its enforcement approach.

The financial regulators embraced this decision after identifying several key events highlighting threats to market integrity and consumer safety. 

These plans were made public after the FSS publicly shared its annual policy intentions on Monday, February 9, which consist of thorough investigations into unethical practices in the cryptocurrency market. Another key objective is the imposition of fines for IT system failures across the financial industry.

Under the new initiative, the Korean financial regulator is deploying advanced monitoring technology to identify suspicious or abusive trading practices more quickly and accurately than traditional methods.

The FSS plans to enhance its oversight measures in the crypto market 

A report by the Yonhap news agency revealed that the financial regulator plans to focus on activities that disrupt market order to enhance its oversight of the crypto market. This consists of regular check-ups for price manipulation triggered by significant traders, widely known as whales, and practices such as the artificial rise of token prices that are inaccessible for deposit or withdrawal on specific exchanges.

Other unethical practices the FSS plans to examine include swift price-pumping schemes, the spread of misleading information via social media, and the manipulation of markets with application programming interface orders. 

This regulatory move comes after a recent incident at Bithumb, a South Korean cryptocurrency exchange. In this incident, the exchange reported that several of its users mistakenly received 620,000 BTC valued at around $44 billion. Bithumb recovered 99.7% of the total Bitcoin accidentally sent to users, with the remaining 0.3% already sold out.

Meanwhile, to demonstrate the seriousness of the situation, the FSS declared that it has already established a task force to prepare for the Digital Asset Basic Act, South Korea’s virtual asset market legislation. This team is assigned the role of focusing on regulations for sharing information on issuances and providing backing for listing exchanges.

Additionally, sources cited Yonhap’s report as saying the task force will establish manuals for assessing licenses, particularly for digital asset service providers and stablecoin issuers. The law’s final version is anticipated to be available in the first quarter of this year. 

South Korea embraces a tokenized securities setup

In January, South Korea moved forward with a new bill establishing a legal framework for security token offerings (STOs). This significant milestone cleared the way for the development and trading of regulated, tokenized securities in the nation, leveraging blockchain technology.

This followed the National Assembly’s approval of amendments to both the Electronic Securities Act and the Capital Markets Act during its meeting, as announced by the government.

Notably, the new regulations develop a framework for the issuance and distribution of tokenized securities via distributed ledger technology. On the other hand, the amendments to the Electronic Securities Act give issuers who have qualified the opportunity to develop tokenized securities, while changes to the Capital Markets Act facilitate the trade of these products through brokerages and other intermediaries.

In a statement, the Financial Services Commission (FSC) maintained a positive outlook, stating, “We believe that token securities will support account management based on distributed ledger technology and enhance the use of smart contracts.” 

At this moment, the FSC anticipated a surge in the use of smart contract security systems based on blockchain technology.