South Korea to Intensify Crypto Market Probes Under 2026 Regulatory Roadmap After Bithumb Error
South Korea’s top financial regulator is preparing a sweeping new phase of crypto market oversight, signaling that digital asset trading will face far closer scrutiny from 2026 onward. The Financial Supervisory Service (FSS) has laid out a policy roadmap that targets sophisticated price manipulation tactics, exchange-related risks and the rollout of a dedicated legal framework for digital assets.
The push comes as authorities react to recent incidents at major local exchanges, including a high-profile error at Bithumb involving excess Bitcoin credits and unusual price swings tied to maintenance at Upbit. Together, these events have reinforced regulators’ concerns about operational vulnerabilities and the potential for abusive trading behavior in one of the world’s most active crypto markets.
Focus on High-Risk Trading and Market Manipulation
FSS Governor Lee Chang-jin stated that from 2026 the agency will significantly ramp up its efforts to identify and crack down on high-risk practices that disrupt market order. The upcoming probes are aimed at coordinated manipulation, large-scale trades by so‑called “whales” and schemes that exploit temporary disruptions at domestic exchanges.
Regulators are particularly concerned with tactics that can distort price discovery. According to the planned roadmap, investigators will examine patterns such as:
– Massive, sudden buy or sell orders that may be used to move prices in thin liquidity conditions.
– Artificial volatility triggered during periods when deposits or withdrawals are suspended.
– Coordinated trading across multiple accounts or platforms, potentially linked through APIs.
– Campaigns that spread false or misleading information to influence prices.
By targeting these mechanisms, the FSS aims to reduce opportunities for bad actors to manipulate markets at the expense of retail investors.
“Gating” and Exchange Disruptions Under the Microscope
One of the key areas of focus is a practice known locally as “gating” — situations in which exchanges temporarily halt deposits or withdrawals of specific tokens. While such measures can be intended as risk management or technical maintenance, they can also create abnormal market conditions.
When deposits or withdrawals are blocked, token supply becomes effectively trapped on a particular platform. If that exchange experiences sudden demand or panic selling while users cannot move funds in or out, prices can decouple sharply from global markets. Manipulators can attempt to exploit these distortions, buying or selling during the gated period and profiting once normal flows resume.
The FSS plans to investigate whether traders are deliberately taking advantage of these windows and whether exchanges’ internal policies and communication around gating events are adequate to prevent abuse.
Automated Surveillance and AI-Powered Monitoring
To support its 2026 efforts, the FSS is already expanding its technological toolkit. On February 2, the watchdog rolled out broader use of artificial intelligence‑driven surveillance systems for crypto markets, reducing reliance on manual review by human analysts.
These tools are designed to:
– Analyze price and volume movements at very short intervals, down to granular time slices.
– Detect “abnormal” patterns that may indicate wash trading, spoofing or pump‑and‑dump activity.
– Flag suspicious “sections” of trading and clusters of related accounts that appear to act in coordination.
– Combine quantitative market data with text analysis to pick up signals of misinformation or orchestrated hype.
Regulators intend to use text analytics to scan public communication channels for repeated narratives or rumors that coincide with unusual trading activity, helping to identify whether fraudulent information is being used to manipulate prices.
Tracking API Abuse and Coordinated Social Media Activity
Another emerging area of concern for the FSS is the use of automated trading interfaces (APIs) and online communication to coordinate market activity. Professional trading firms, algorithmic traders and even retail users commonly rely on APIs to execute automated strategies. However, in the hands of manipulators, these tools can help orchestrate large-scale, synchronized orders that move markets in a short period.
The regulator says it will specifically monitor:
– Strategies that use market-order APIs to generate sudden price spikes or crashes.
– Suspicious timing between waves of social media posts and abrupt changes in trading behavior.
– Networks of accounts that trade in lockstep or amplify the same misleading narratives.
By linking order flow data with patterns in public discourse, the FSS hopes to map out manipulation networks more effectively than in the past.
Preparing the Digital Asset Basic Act
Parallel to the enhanced surveillance drive, South Korea is moving toward the second phase of its crypto regulatory framework: the introduction of the Digital Asset Basic Act. A dedicated task force has been created within the FSS to prepare for this law, focusing on implementation design rather than enforcement.
The task force’s responsibilities include:
– Drafting and refining disclosure requirements for token issuers and service providers.
– Establishing detailed oversight mechanisms for exchanges and other platforms.
– Setting licensing and registration standards for companies that handle digital assets.
– Developing rules around custody, segregation of customer funds and risk management.
The Digital Asset Basic Act is expected to provide the overarching legal architecture for how digital assets are traded, stored and supervised in the country, aligning the fast-growing sector more closely with traditional financial markets.
Exchange Incidents Fuel a Tougher Regulatory Stance
The more hardline tone from regulators follows a string of operational and market incidents at major exchanges.
On Sunday, Bithumb reported that it had mistakenly credited users with excess Bitcoin during a promotional event. The platform later said it had recovered 99.7% of the over-credited BTC and stressed that no customer funds were permanently lost. However, the mishap caused sharp short-term volatility in Bitcoin prices on the exchange and forced Bithumb to introduce compensation measures for affected users.
The episode immediately drew regulatory attention. According to domestic media reports, the Financial Services Commission (FSC) convened an emergency inspection meeting the same day with the FSS and the Korea Financial Intelligence Unit (KoFIU). Officials reportedly instructed regulators to carry out a comprehensive review of internal controls at all domestic crypto exchanges, not just Bithumb.
The message from authorities was clear: operational errors that lead to mispricing, disruptions or confusion among investors will no longer be treated as isolated glitches, but as systemic risks that require sector-wide responses.
Upbit’s ZKsync Price Swings Under Review
Another recent flashpoint involves ZKsync trading on Upbit, one of South Korea’s largest crypto exchanges. On February 3, the FSS confirmed it was examining unusual price movements in the ZKsync token that occurred during a system maintenance window on the platform.
During such maintenance periods, parts of an exchange’s infrastructure may be temporarily limited, potentially affecting order processing, visibility of order books or users’ ability to trade. The regulator is analyzing market data from that timeframe and has indicated that the review could escalate into a formal investigation depending on what it finds.
Upbit’s operator has stated that it maintains internal systems to detect suspicious activity and has protocols for working with regulators, including the ability to rapidly provide detailed trading records upon request. Nonetheless, the fact that regulators are scrutinizing individual token events underscores the new degree of attention being paid to exchange resilience and transparency.
What the 2026 Crackdown Means for Traders and Exchanges
For traders, the FSS roadmap suggests that the era of relatively loose oversight in Korean crypto markets is ending. Those engaging in legitimate strategies will face more frequent monitoring, but the most immediate impact will be felt by actors who rely on:
– Coordinated pump‑and‑dump schemes.
– Exploiting short-term exchange outages or gating events.
– Spreading rumors or false claims to influence prices.
– Using multiple accounts and APIs to mask manipulative intent.
Algorithms and large orders will not be banned, but they will be examined far more closely for signs of abuse. Market participants can expect more investigations into abnormal price spikes or crashes, and more requests for data from exchanges.
For exchanges, the bar for internal controls, risk management and technical robustness is rising. Platforms will likely need to:
– Document and justify any suspension of deposits or withdrawals in greater detail.
– Improve testing and security around promotional campaigns to avoid Bithumb‑style crediting errors.
– Enhance surveillance systems to align with regulators’ expectations, including tools to flag suspicious trades and account groups.
– Maintain clear communication with users during maintenance or disruption events to reduce speculation and panic.
Failure to meet these standards may invite stricter sanctions, more frequent inspections or, in extreme cases, pressure to suspend operations.
Protecting Investors While Preserving Market Innovation
Behind the tougher stance lies a broader policy debate: how to protect investors and maintain financial stability without stifling innovation in a sector that has become economically significant for South Korea. The country is home to an active retail trading community, a growing blockchain startup ecosystem and some of the world’s most liquid crypto markets.
The FSS’s reliance on AI tools, data-driven analysis and a dedicated Digital Asset Basic Act suggests that authorities are opting for a framework that tries to integrate crypto into existing financial oversight structures rather than banning or sidelining it. The focus is firmly on:
– Transparency in how exchanges operate.
– Accountability when mistakes or abuses occur.
– Deterrence of manipulation and fraud.
– Clear rules for market participants.
How effectively this balance is struck will shape not only the safety of local investors, but also South Korea’s position as a regional hub for digital finance.
Practical Takeaways for Market Participants
As the 2026 roadmap comes into focus, several practical implications emerge:
– Traders should assume that large, unusual trades and patterns of coordinated activity are more likely to be flagged, even if they are executed through legitimate tools like APIs.
– Any strategy that depends on exploiting exchange disruptions, maintenance windows or gating events carries rising regulatory risk.
– Exchanges that invest early in robust compliance systems, monitoring tools and transparent communication will be better positioned when the Digital Asset Basic Act takes full effect.
– Market participants may see more frequent announcements of investigations into specific coins, events or trading periods as authorities test and refine their surveillance methods.
South Korea’s evolving approach signals that the crypto industry is moving into a new phase, where sophisticated oversight and rapid data analysis become as much a part of the market landscape as high-frequency trading and digital wallets. The Bithumb and Upbit incidents have accelerated this transition, turning what might have been a gradual regulatory shift into a more urgent, system-wide redesign of how digital assets are policed.