South Korea to Launch Advanced Crypto Surveillance System

South Korea’s Financial Supervisory Service (FSS) has announced the development of a 24-hour surveillance system in collaboration with local cryptocurrency exchanges. This system is designed to detect and investigate suspicious activities in the crypto market. Scheduled to launch on July 19, the system coincides with implementing South Korea’s first regulatory framework to protect crypto investors.

South Korea’s Financial Supervisory Service has set up a 24-hour monitoring system for suspicious crypto market activity.🔎

Launching on July 19 alongside the country's first crypto investor protection law.🇰🇷

— Moby Media (@mobymedia) July 4, 2024

Preparation and Features of the Surveillance System

From January to May, the FSS has been working on a standardized reporting format that exchanges will use to submit transaction data. This preparation phase allowed the development of a robust system that isolates irregular transactions from regular ones.

The FSS utilized the Korea Exchange’s (KRX) criteria for identifying abnormal transactions and conducted several simulations to refine the models and metrics. According to the FSS, this new system is expected to filter out abnormal activities meticulously.

The agency noted that major local exchanges, handling 99.9% of South Korea’s cryptocurrency trades, have integrated the new monitoring system, which is based on recently updated criteria. Additionally, the FSS recommended that exchanges form specialized teams to monitor suspicious transactions. They also offered guidelines to help identify illegal activities by examining data such as onchain information.

South Korea Enhances Crypto Compliance and User Protection

To enhance regulatory compliance, South Korean exchanges have established a direct hotline with the FSS to report potentially rule-breaking transactions. This step is part of a broader effort to ensure transparency and adherence to the law within the digital asset space.

The Virtual Asset User Protection Act will also take effect on July 19, coinciding with the system’s launch. This pioneering legislation aims to eliminate illegal market activities such as insider trading, market manipulation, and fraudulent transactions. The regulation requires crypto service providers to keep over 80% of digital asset deposits in cold storage. It also mandates enrollment in insurance programs to compensate users for losses due to security breaches.

South Korean lawmakers are drafting follow-up legislation to the User Protection Act. Discussions focus on stablecoin regulation and the possibility of institutional trading in the crypto market. This ongoing legislative effort reflects the government’s commitment to creating a safe and regulated environment for cryptocurrency trading.

South Korea Sets New Standards in Crypto Regulation

Earlier this week, South Korean exchanges and their representative body unveiled a new code of conduct for local crypto firms. This involves reassessing the 1,333 cryptocurrencies traded in South Korea. South Korea’s proactive crypto regulation underscores its importance, reflecting its significant presence in the global crypto market.

The Korean won has recently overtaken the US dollar as the most-used currency for crypto trading globally. Approximately 10% of the country’s population is involved in crypto, with a notable preference for smaller coins over major ones like Bitcoin.

The global crypto market watches closely as South Korea prepares to implement these comprehensive surveillance and regulatory measures. The country’s approach may serve as a model for others seeking to balance market freedom with investor protection and legal compliance in the rapidly evolving cryptocurrency sector.

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