South Korean Regulator Targets API-Driven Crypto Market Manipulation

South Korea's Financial Supervisory Service (FSS) has issued a stern warning to cryptocurrency traders, revealing that API-based automated trading now constitutes approximately 30% of the nation's crypto buy-and-sell turnover. The regulator is moving to crack down on abusive automated trading patterns, citing concerns that high-frequency tools are being weaponized to manipulate asset prices and create false impressions of market liquidity. The FSS identified several manipulative tactics, including the use of repeated small-scale trades—some ranging from 5,000 to 10,000 won (approximately $3 to $6)—to simulate active trading. Additionally, the regulator noted that some traders have used high-priced limit orders to artificially drive prices upward, creating a lure for retail investors before selling into the resulting momentum. This enforcement push coincides with broader systemic tightening in the region. Regulators recently mandated that exchanges reconcile internal ledgers with actual asset holdings every five minutes after inspections revealed weak trade-halting systems and delayed balance checks. Simultaneously, the Financial Services Commission (FSC) is addressing loopholes in withdrawal-delay exemptions that have previously facilitated the rapid movement of funds in phishing scams. Despite these efforts, the regulatory landscape remains complex. A recent court decision overturning a partial suspension of Dunamu, the operator of the Upbit exchange, highlights significant gaps in the current legal framework, suggesting that enforcement may face continued judicial hurdles.