South Korean regulators are increasing oversight of the domestic cryptocurrency market, moving toward faster, more coordinated detection of suspicious trading amid renewed volatility.
The Financial Supervisory Service (FSS) said it is reviewing sharp price swings in the ZKsync token listed on Upbit after extreme volatility concentrated around a system maintenance window. The FSS is analyzing trading data and may escalate the matter into a formal investigation depending on its findings. Officials and legal experts told local media the episode illustrates a shift in regulator response: emphasis is moving from treating incidents in isolation to strengthening monitoring systems and clarifying expectations for exchanges viewed as critical infrastructure. Cointelegraph contacted Upbit operator Dunamu but received no comment before publication.
The FSS has recently expanded its use of artificial intelligence to monitor digital asset trading, upgrading its in-house crypto intelligence system to automatically detect potential manipulation across multiple time frames. The agency says the system reduces reliance on manual probes and allows earlier detection of suspicious trading windows. Planned enhancements include tools to identify coordinated trading networks and to trace the origin of funds used in suspected manipulation.
Regulators have also signaled willingness to act faster. The Financial Services Commission (FSC) has been reported to consider mechanisms allowing pre-emptive freezing of funds to prevent laundering of illicit proceeds tied to ongoing investigations.
At the same time, surveillance is translating into enforcement. South Korean courts are beginning to apply criminal penalties under the Virtual Asset User Protection Act. Recently, the Seoul Southern District Court handed down its first prison sentence under the law, convicting a crypto executive surnamed Lee of price manipulation involving a token listed on Bithumb. The court sentenced Lee to three years in prison, finding that repeated high-price buying and low-price selling, along with placement of deceptive buy orders, amounted to market manipulation.
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