 ▲ South Korea’s financial watchdog launches a planned investigation into cryptocurrency price manipulation and introduces punitive fines for IT incidents. |
The Financial Supervisory Service (FSS) will conduct planned investigations targeting high-risk areas that undermine market order in the cryptocurrency market, including various forms of price manipulation.
It will also focus on preventing IT risks by introducing punitive fines for IT incidents in the financial sector and strengthening cybersecurity accountability for chief executive officers (CEOs).
The FSS announced these measures as part of its work plan for this year on the 9th.
The watchdog said it would carry out targeted investigations into major high-risk areas of the virtual asset market that disturb market discipline.
Typical examples include price manipulation by so-called “whales” that trade using massive funds, the “fishbowl” tactic of artificially adjusting prices of virtual assets whose deposits and withdrawals are suspended on specific exchanges, and the “racehorse” tactic of rapidly pushing up prices by accumulating large volumes at a particular time.
Price manipulation using market-price application programming interface (API) orders and fraudulent trading through the spread of false information on social media are also considered high-risk areas.
The FSS plans to develop functions that analyze abnormal surges in virtual asset prices on a second-by-second and minute-by-minute basis to automatically identify suspect periods and groups, as well as AI-based text analysis capabilities.
In addition, the FSS recently launched a task force to prepare for the introduction of the Digital Asset Framework Act, aiming to support the effective implementation of phase-two virtual asset legislation.
The task force will establish disclosure systems related to virtual asset issuance and trading support, and develop licensing review manuals for digital asset operators and stablecoin issuers.
To promote rational user choices and sound competition in the industry, the FSS will also pursue differentiated management and more detailed disclosure of trading fees at virtual asset exchanges.
Strengthening on-site enforcement against crimes affecting people’s livelihoods in the financial sector is also included in this year’s plan, as part of efforts to eradicate what President Lee Jae-myung has called “cruel finance.”
To bolster on-site 대응 against illegal private lending and related offenses, the FSS will promote a consultative body among relevant agencies for special judicial police handling financial crimes affecting households.
It also plans to build an AI-based early blocking system for voice phishing by sharing crime-related information held separately by telecommunications and financial companies.
The FSS will expand and reorganize its reporting center for victims of illegal private finance to strengthen victim counseling functions.
For voice phishing cases, the watchdog will establish a cooperative system to ensure immediate transition to criminal investigation through close coordination with the police after initial probes, and prepare to implement a compensation liability system for voice phishing damages.
The FSS also plans to establish a supervisory framework to prevent IT risks in the financial sector.
Measures include introducing punitive fines for IT incidents, strengthening the security responsibilities of CEOs and chief information security officers (CISOs), and introducing information security disclosures. In consultation with the Financial Services Commission, the FSS will revise supervisory regulations and prioritize items that can be improved quickly.
Financial companies will be encouraged to manage their own IT asset inventories and identify vulnerabilities, while those that fail to remedy critical weaknesses will face on-site inspections and audits. Within this month, the FSS will fully launch its integrated monitoring system (FIRST) to collect and disseminate cyber threat information across the financial sector.
Additionally, to enhance fairness and accountability in the use of AI by financial companies, the FSS plans to establish “Financial AI Ethics Guidelines” and present an “AI Risk Management Framework” to help firms manage risks throughout the entire AI adoption and utilization lifecycle.
To protect user funds at electronic payment gateway (PG) companies, the FSS will promote the introduction of dedicated deposit products for prepaid balances and examine the external management status of PG companies’ settlement funds.
Disclaimer: This translated article is provided for informational purposes only.