South Korea has launched a comprehensive monitoring system to oversee cryptocurrency transactions ahead of the enactment of the Virtual Asset User Protection Act. Announced by the Financial Supervisory Service (FSS) on July 4, the system aims to detect and report suspicious activities on digital asset exchanges starting July 19. This initiative, developed in collaboration with South Korean exchanges, is designed to enhance market transparency and investor protection.
Under the new regulations, cryptocurrency exchanges will be required to implement systems enabling authorities to receive reports on suspicious transactions. The FSS emphasized that the monitoring system will cover nearly 99.9% of the country’s trading volume, ensuring thorough oversight to combat market manipulation and illicit trading practices.
In addition to continuous monitoring, the FSS advised exchanges to establish specialized teams to monitor suspicious transactions. Guidelines have been provided to help identify illegal activities, such as unfair trading based on undisclosed information, price manipulation, and falsification of trading data.
Once identified, suspicious transactions will be promptly reported to the FSS through dedicated data channels. These measures are part of broader efforts mandated by the Virtual Asset User Protection Act of 2023 to regulate market practices and safeguard investor interests.
The FSS has developed standardized reporting formats for transaction data submissions from local exchanges, enabling the identification of irregular transactions. Drawing on criteria from Korea Exchange (KRX), the FSS has constructed models and metric indicators through simulations to meticulously filter out abnormal transactions.
As of June 16, 29 cryptocurrency exchanges, including prominent platforms like Upbit, Bithumb, Coinone, Korbit, and Gopax, have been registered with the FSS and will undergo stringent monitoring under the new regulations. These exchanges will also need to adhere to stricter guidelines for reviewing token listings to ensure market integrity.
Furthermore, the new law mandates that crypto service providers secure over 80% of deposits in cold storage to protect user funds and participate in insurance programs for potential user compensation in case of security breaches. South Korean lawmakers are actively working on additional legislation related to stablecoin regulation and institutional crypto trading.
Recently, South Korean exchanges and their representative body introduced a new code of conduct for local firms. This includes a re-evaluation of the 1,333 cryptocurrencies traded domestically to ensure compliance with updated regulatory standards.
The implementation of these measures underscores South Korea’s commitment to fostering a secure and transparent environment for cryptocurrency trading while upholding stringent regulatory standards.
