South Korea’s Financial Services Commission (FSC) has investigated more than 40 cases of unfair trading related to cryptocurrencies in the past two years, including market manipulation and fraudulent trading schemes.
New regulatory framework targets crypto misconduct
The investigations come after the implementation of the Virtual Asset User Protection Act, which went into effect in July 2024. According to FSC Chair Lee Eog-won, authorities have reported or referred 30 of these cases to law enforcement agencies, identifying 25 suspects since the law’s enactment.
The Virtual Asset User Protection Act was established to bring the digital asset market within South Korea’s legal and regulatory framework, focusing on user protection in the growing cryptocurrency sector.
Today marks the second anniversary of the Virtual Asset User Protection Act, bringing the virtual asset market into the legal fold and establishing a system for user protection, noted Lee.
Lee revealed that individuals involved in these unfair trading practices, such as insider trading and wash trading, amassed average unlawful profits of around 1.4 billion Korean won, equivalent to about $940,000.
Enhanced oversight of virtual asset service providers
The Act requires virtual asset service providers (VASPs) to implement strict custodial measures. These companies must keep client deposits and crypto assets separate from company funds and hold customer cash reserves with local banks. The objective is to safeguard users and reduce risks associated with platform insolvency or internal mismanagement.
Alongside protecting consumers, the legislation empowers the FSC with extended authority to supervise and inspect VASPs, aiming to deter various illicit activities in the industry.
Mini dictionary: Virtual asset service providers (VASPs) are companies or platforms that facilitate the buying, selling, transferring, or safekeeping of digital assets, including cryptocurrencies.
The FSC is tasked with market monitoring and investigating suspicious trading behaviors. The commission has indicated plans to strengthen its technological tools by advancing the use of artificial intelligence to enhance surveillance and responses to emerging risks across digital asset markets.
Future steps and continued vigilance
Lee has emphasized that regulatory efforts will persist in addressing unfair trading practices. He highlighted the authorities’ intention to proactively enhance investigation and monitoring systems.
The FSC will continue to improve its market surveillance and investigation capabilities using AI, ensuring proactive responses to high-risk areas.
South Korea has positioned itself among the early adopters of comprehensive digital asset regulations in Asia, reflecting the growing need to address the evolving risks associated with cryptocurrencies.
