South Korean regulators are tightening oversight of the domestic crypto market, signaling a quicker and more coordinated response to suspicious trading activity amid renewed volatility.
The tougher stance came into focus after the Financial Supervisory Service (FSS) said it was reviewing sharp price movements in the ZKsync token listed on Upbit. According to The Korea Economic Daily (Hankyung), the volatility was concentrated around a system maintenance window, raising red flags for regulators.
The FSS said it is analyzing trading data and may escalate the review into a formal investigation depending on its findings.
FSS officials and legal experts cited by Hankyung said the case reflects a broader shift in regulatory posture. Rather than focusing solely on isolated incidents, authorities are prioritizing stronger monitoring systems and clearer expectations for exchanges that function as critical market infrastructure.
Faster Detection and Earlier Escalation
South Korea’s effort to tighten crypto market oversight has been reinforced by recent legislative and surveillance upgrades.
On Monday, the Financial Supervisory Service (FSS) expanded its use of artificial intelligence to monitor digital asset trading, enhancing its in-house crypto intelligence system to automatically flag potential market manipulation across multiple time frames.
The regulator said the system reduces dependence on manual reviews and allows suspicious trading activity to be identified earlier. Planned upgrades include tools to uncover coordinated trading networks and trace the sources of funds involved in suspected manipulation.
Authorities have also indicated a readiness to act more quickly. On Jan. 6, local media reported that the Financial Services Commission (FSC) was considering measures to allow the preemptive freezing of funds to stop the laundering of illicit proceeds tied to ongoing investigations.
From Surveillance to Enforcement
The surveillance push comes as South Korean courts begin enforcing criminal penalties under the country’s crypto investor protection framework.
On Wednesday, the Seoul Southern District Court reportedly issued its first prison sentence under the Virtual Asset User Protection Act, convicting a crypto executive—identified only by the surname Lee—of manipulating the price of a token listed on local exchange Bithumb.
According to Hankyung, the court sentenced the executive to three years in prison, finding that repeated high-priced buying, low-priced selling, and the placement of misleading buy orders amounted to market manipulation.
