South Korea’s financial regulator is introducing a novel system to monitor illicit cryptocurrency activities, coinciding with the imminent implementation of its inaugural law aimed at safeguarding digital asset users.

In a recent announcement, the Financial Supervisory Service (FSS) disclosed its collaboration with domestic cryptocurrency exchanges to develop a round-the-clock surveillance mechanism targeting suspicious transactions within the crypto sphere. This system is set to go live alongside the enforcement of the Virtual Asset User Protection Act on July 19th.

The new legislation seeks to outlaw market manipulation, specific forms of trading activities, and the exploitation of undisclosed significant information pertaining to digital assets. Offenders of this law could face severe penalties, including life imprisonment for illicit gains exceeding 5 billion won (approximately $3.76 million USD), alongside substantial fines equivalent to three to five times the profits derived from the infringement.

In support of regulatory compliance among cryptocurrency exchanges, the FSS is launching this monitoring system with the objective of ensuring adherence to legal responsibilities. “With the enactment of the Virtual Asset User Protection Act, unfair trading practices in the virtual asset market are proscribed, mandating exchanges to maintain an audit trail of abnormal transactions,” the statement affirms.

South Korea, the fourth-largest economy in Asia, is instituting these user protection measures in the aftermath of Terraform Labs’ $40 billion collapse in 2022, a crypto venture co-founded by South Korean national Do Kwon.

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