FSS: “11 million virtual asset users”... to strengthen market surveillance and internal controls

South Korea’s Financial Supervisory Service (FSS) will move to bolster internal controls and upgrade exchanges’ market surveillance systems to restore trust in the digital asset market and establish market order. With virtual asset users numbering about 11 million, the regulator plans to build a supervisory framework on par with that of the regulated financial sector.

On the 4th, Lee Jong-oh, Deputy Assistant Governor for the FSS Digital & IT Division, said at the 2026 Financial Supervision Briefing, “We will concentrate our supervisory capabilities so that the digital asset market, currently used by around 11 million people, can leap forward into a trusted, institutional market.”

The FSS will first push improvements to internal controls and IT systems related to digital assets. Lee stressed responsible management by operators, saying, “The industry also must work to restore market trust with a do-or-die resolve.”

The regulator will also work to establish supervisory and inspection frameworks in preparation for the second-stage digital asset legislation to be introduced in the future. The FSS plans to put in place new digital-asset supervision and inspection systems to respond to the implementation of the regime and to overhaul its market management framework.

The presentation also outlined recent trends in Korea’s virtual asset market. Choi Kang-seok, Director of the FSS Virtual Asset Supervision Bureau, said, “Since October 2025, prices of major virtual assets have fallen sharply amid factors such as heightened global macroeconomic uncertainty.” He added, “Bitcoin has fallen about 46% from its peak, and major altcoins such as Ethereum have also posted declines of around 40–60%.”

While the market’s size has shrunk, participation has increased. Choi said, “As of end-June 2025, the market capitalization of domestic virtual assets was about KRW 95.1 trillion, down 11.7% from the end of the previous year, but the number of users rose 11% to about 10.77 million,” adding that “a structural shift is emerging in which the market contracts while the user base expands.”

The FSS believes that, as the virtual asset market has grown rapidly, qualitative growth is needed in areas such as internal controls and system stability. Choi said, “In the securities market, functions are dispersed among exchanges, clearing and settlement institutions, and securities firms, enabling mutual checks and balances, but in the virtual asset market multiple functions are concentrated in operators, leaving structural stability vulnerable,” adding that “there is a need to strengthen IT system stability and internal control frameworks.”

Accordingly, the FSS plans to overhaul its supervisory framework and strengthen market surveillance functions in line with discussions on second-stage legislation such as the Framework Act on Digital Assets. It also plans to establish a disclosure framework related to the issuance of virtual assets and support for trading, and to refine licensing procedures for operators.

Oversight of unfair trading practices will also be strengthened. Through market surveillance, the FSS plans to screen for targets with a high likelihood of unfair trading such as price manipulation, and to conduct thematic investigations into high-risk areas including price adjustment in the early circulation stage and trades using API orders. It also plans to develop a function that automatically detects groups suspected of price manipulation using an AI-based analytics system.

The FSS also plans to enhance exchanges’ market surveillance capabilities. It will establish separate screening criteria to identify problematic API trading and upgrade investigation systems to improve the capacity to respond to unfair trading.