South Korea's Financial Supervisory Service (FSS) announced on Monday that API-based automated trading now accounts for approximately 30% of the country's cryptocurrency buy-and-sell turnover. The regulator issued a stern warning that some traders are exploiting these automated tools to artificially inflate trading volumes and manipulate market prices.
The FSS detailed specific manipulation tactics it has observed, including the repeated placement of small market buy and sell orders to create a false appearance of active trading. Another method involves using higher-priced limit orders to artificially drive prices upward. In one illustrative case, a trader used API-driven orders ranging from 5,000 won (about $3) to 10,000 won (about $6) to simulate genuine market activity, only to sell into the rising prices once retail investors were drawn in. In another instance, a trader repeatedly submitted higher-priced buy orders to systematically push the market toward a predetermined target price.
In response, the FSS stated it will launch targeted investigations into accounts suspected of using APIs for excessive or abnormal trading patterns. This signals a significant shift toward closer scrutiny of automated and algorithmic trading strategies within the crypto market. The regulator also cautioned investors against indiscriminately using publicly shared high-frequency trading code and advised them to be wary of assets that show sudden, unexplained spikes in price and trading volume.
This crackdown on market abuse is part of a broader enforcement push by South Korean authorities. On April 7, regulators ordered cryptocurrency exchanges to reconcile their internal ledgers with actual asset holdings every five minutes, a move prompted by inspections that found delayed balance checks and weak trade-halting systems. Furthermore, on April 8, the Financial Services Commission (FSC) highlighted how inconsistent rules around withdrawal-delay exemptions had been exploited by bad actors, with such accounts linked to a majority of voice phishing-related financial losses.
However, these enforcement efforts face legal hurdles. On April 9, a South Korean court overturned a partial suspension of Dunamu, the operator of the Upbit exchange, citing unclear regulations. This decision underscores the significant gaps that still exist within South Korea's developing digital asset regulatory framework, creating a complex environment where compliance expectations are rising despite ongoing legal ambiguity.
