South Korea’s Financial Supervisory Service announced on July 4 the launch of a 24-hour surveillance system, developed in partnership with local exchanges, to monitor suspicious activities in the cryptocurrency market.
According to the FSS press release, this new system will be operational on July 19, and exchanges are now under significant pressure to comply with the new regulatory environment.
S. Korea Deploys Crypto Surveillance to Combat Suspicious Trading
The FSS, therefore, stated that it is establishing a system to monitor unusual cryptocurrency trading activity. Exchanges are required to input data into this system to comply with the new regulations set to take effect on July 19. The system will flag anomalies such as trades outside normal volume and price ranges, large transactions, and unusually slow execution times. One of the primary goals is to identify accounts involved in suspicious activities.
South Koreans play a significant role in the crypto market, with the won surpassing the dollar earlier this year as the most-used currency for digital asset transactions. Approximately 10% of the South Korean population is involved in cryptocurrency, with most trading activity focused on smaller, riskier coins rather than leading assets like Bitcoin.
From January to May this year, the FSS developed a standardized reporting format for transaction data submissions from local exchanges. This format formed the foundation for a system designed to identify irregular transactions. The FSS modeled its criteria for detecting abnormal transactions after those used by the Korea Exchange (KRX), refining these models and indicators through multiple simulations to ensure meticulous filtering of suspicious activities.
Preparations for Altcoin Review Amid Stricter Crypto Regulations
The FSS also reported that major local exchanges, responsible for 99.9% of South Korea’s cryptocurrency trades, have already implemented the monitoring system based on the latest criteria.
South Korean exchanges are set to review the listings of over 1,000 altcoins in the next six months to ensure compliance with the above mentioned Virtual Asset User Protection Act, and are, therefore, under significant pressure to comply with the new regulatory environment.
This law aims to curb illicit activities in the cryptocurrency market, requiring exchanges to implement stringent measures such as protecting over 80% of user deposits in cold storage and enrolling in insurance programs for potential user compensation in case of security breaches.
Despite the comprehensive review process mandated by the new regulations, the
Digital Asset Exchange Alliance (DAXA), which represents five major Korean exchanges, anticipates that there will be minimal “mass delistings” over the next six months. This expectation is based on the proactive regulatory compliance measures that these exchanges have already implemented.
The regulations will impact nearly three dozen registered crypto exchanges, including major platforms such as Upbit, Bithumb, Coinone, Korbit, and Gopax. These exchanges will conduct initial reviews of the 1,333 cryptocurrencies traded within the country to determine whether to maintain or delist each token.
In summary, while South Korean exchanges face significant regulatory pressure, their proactive compliance efforts are expected to mitigate the need for extensive delistings.
Traders will be closely watching how the user protection rules are applied to assess any potential impact on crypto prices. Both Bitcoin and smaller tokens have faced difficulties recently, following a strong first quarter.
Terraform Labs Co-Founder Do Kwon Famous Fraud Charges
South Korea has approved its first standalone digital-asset bill aimed at enhancing investor protection, coming just over a year after the collapse of tokens created by local entrepreneur Do Kwon, which contributed to a $2 trillion downturn in the cryptocurrency market.
Terraform Labs co-founder Do Kwon was charged for civil fraud. These charges stem from allegations that he made false claims and misled investors about Terraform’s cryptotoken.
Do Kwon had evaded South Korean charges for several months before being arrested in Montenegro in March 2023 for using a counterfeit passport. This arrest triggered competing extradition claims from both Seoul and Washington.
https://twitter.com/HouseofINK_IN/status/1770988762098704605
South Korea’s First Crypto Law Enforces Stringent Protections
The Virtual Asset User Protection Act, will take full effect on July 19. The law targets illicit market activities such as using undisclosed information for crypto investments, market price manipulation, and fraudulent transactions. It also mandates that crypto service providers protect over 80% of user deposits in cold storage and enroll in insurance programs to compensate users in case of security breaches.
Lawmakers are currently working on additional legislation to complement the Virtual Asset User Protection Act, addressing topics like stablecoin regulation and allowing institutional trading of cryptocurrencies.
