The Financial Supervisory Service (FSS) of South Korea has announced the launch of a “continuous monitoring system” for suspicious cryptocurrency transactions on exchanges. This new system, created in collaboration with South Korean digital asset exchanges, will be operational on July 19, coinciding with the implementation of the Virtual Asset User Protection Act. Exchanges subject to the new law will be required to implement a system that allows authorities to receive reports on suspicious transactions to ensure compliance.
The FSS aims to combat market manipulation and illegal trading by enabling constant monitoring of abnormal transactions to identify and report suspicious activities, such as market manipulation and other illegal trading practices. The monitoring will cover approximately 99.9% of the country’s trading volume, providing comprehensive oversight of the market. Additionally, exchanges are advised to establish dedicated teams to monitor dubious transactions and follow guidelines for identifying illegal activities through auditing information, such as on-chain data.
Under the new framework, once suspicious transactions are identified, they will be reported to the FSS through a dedicated data transmission line. This initiative is part of broader efforts to regulate unfair trade practices and protect investors, as mandated by the Virtual Asset User Protection Act passed in 2023. From January to May, the FSS developed a standardized reporting format for transaction data submissions from local exchanges and built a system capable of distinguishing irregular transactions.
As of June 16, 29 cryptocurrency exchanges, including major players like Upbit, Bithumb, Coinone, Korbit, and Gopax, were registered with the FSS and will be subject to this continuous monitoring. These exchanges must also adhere to stricter review guidelines for token listings to enhance the market’s integrity. The new law also requires crypto service providers to safeguard over 80% of deposits in cold storage to protect user funds and enroll in insurance programs for potential user compensation in case of security breaches.
South Korean lawmakers are currently developing follow-up legislation to the User Protection Act, addressing issues such as stablecoin regulation and institutional crypto trading. Earlier this week, South Korean exchanges and their representative body announced the establishment of a new code of conduct for local firms, including re-evaluating the 1,333 cryptocurrencies traded domestically to ensure compliance with the new regulatory standards. With these new regulations in place, South Korea aims to create a safer and more transparent environment for cryptocurrency trading, safeguarding investors and preventing market manipulation and illegal activities.
