South Korea Cracks Down on Crypto Manipulation with First Fines and Global Rules

South Korea has taken a decisive step in its evolving regulatory approach to virtual assets, as the Financial Services Commission (FSC) imposes its first-ever penalties against individuals engaged in unfair trading practices. This marks a pivotal moment in the country’s digital asset landscape, signaling a shift from passive observation to active enforcement. The FSC has targeted three primary forms of misconduct: market manipulation by a "whale" investor inflating prices through artificial trading volume, dissemination of false information on social media, and fraudulent trading exploiting price discrepancies between exchanges. These actions aim to establish a clear precedent that such activities will not be tolerated under South Korea’s increasingly structured regulatory framework [1].

The FSC’s enforcement actions underscore a broader commitment to investor protection and market integrity. In one notable case, a whale investor was found to have purchased tens of billions of won in a specific cryptocurrency, driving up its price before swiftly selling the entire position for significant profit. This was further compounded by cross-border arbitrage tactics, wherein the individual acquired the same asset at lower prices on overseas exchanges and transferred it for sale in domestic markets. The FSC’s imposition of financial penalties serves as a deterrent to such elaborate schemes and reinforces the regulator’s capacity to address complex, globalized manipulation strategies [1].

These developments align with South Korea’s broader regulatory agenda, which includes the formalization of a stablecoin regulatory framework. In response to global trends such as the U.S. GENIUS Act and Hong Kong’s stablecoin regulations, South Korea’s Financial Services Commission plans to introduce draft stablecoin laws by October 2025. This move has drawn interest from major stablecoin issuers like Tether and Circle, which have engaged in discussions with South Korean financial leaders. The government has also paused work on a central bank digital currency (CBDC) in favor of accommodating privately issued stablecoins, with major banks preparing to launch won-backed stablecoins once the regulatory framework is finalized [2].

In addition to addressing market manipulation, South Korea is expanding its regulatory reach through international cooperation. Beginning in 2026, the country will implement the Organization for Economic Cooperation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF), which requires cross-border exchange of virtual asset transaction data. Foreign investors trading on Korean exchanges such as Upbit and Bithumb will have their identifying and transactional data shared with their home country’s tax authorities, while Korean nationals’ overseas crypto transactions will be reported to the National Tax Service. This initiative aligns with a 48-nation global effort to close offshore tax loopholes and enhance transparency in digital asset transactions [3].

However, the regulatory landscape is not without challenges. South Korea’s new FSC chair nominee, Lee Eok-won, has faced scrutiny for his investment in U.S. stocks, including shares in a major Bitcoin-related firm. Critics argue that such investments contradict the government’s stated policy of revitalizing the domestic stock market. Lee has defended his actions as an effort to gain market experience and understand investor sentiment, but the controversy highlights the scrutiny being placed on top regulatory figures in the wake of significant policy changes [5].

As South Korea continues to refine its approach to virtual assets, the country’s actions are influencing the global regulatory conversation. The imposition of crypto fines, the development of stablecoin legislation, and international information-sharing mechanisms collectively demonstrate South Korea’s ambition to shape a transparent, regulated, and secure digital asset ecosystem. These steps are not only intended to protect local investors but also to position South Korea as a key player in the international digital economy [1].

Source:

[1] title1 (https://www.mexc.fm/en-TR/news/south-korea-crypto-fines-decisive-action-against-market-manipulators-unveiled/83325)

[2] title2 (https://www.elliptic.co/blog/crypto-regulatory-affairs-stablecoin-and-digital-payments-work-accelerates-following-us-genius-act)

[3] title3 (https://finance.yahoo.com/news/south-korea-begin-global-sharing-125117813.html)

[4] title4 (https://www.sciencedirect.com/science/article/pii/S2212473X25000501)

[5] title5 (https://finance.yahoo.com/news/korea-top-regulator-faces-scrutiny-233000252.html)