South Korea Flags API-Based Crypto Manipulation as Automated Trading Hits 30% of Volume

South Korea’s financial regulator has issued a warning to crypto traders over market manipulation risks linked to API-based automated trading, as authorities move to tighten oversight of algorithm-driven activity.

The Financial Supervisory Service (FSS) said it has identified multiple cases of unfair trading conducted through application programming interfaces (APIs), which now account for around 30% of total crypto trading volume in the country.

According to the regulator, abusive practices include price manipulation, artificial volume creation, and distortion of order books. One commonly observed method involves submitting repeated small buy and sell orders to simulate active trading, while simultaneously placing higher-priced limit orders to push prices upward.

Other tactics include spoofing, where large buy orders are placed and quickly cancelled to create false demand, and coordinated activity across multiple accounts to amplify market signals. In some cases, traders pre-set sell orders and then use automated buying to drive prices toward target levels before exiting positions.

The FSS warned that such behaviour may constitute illegal market manipulation, particularly when excessive or abnormal trading patterns are detected. It added that submitting high-priced or repeated odd-lot orders via APIs could fall under unfair transaction rules.

Authorities also highlighted operational risks tied to automation. If an API key is leaked, accounts could be used for unauthorised trading or money laundering, potentially exposing the account holder to liability. The regulator urged users to closely monitor pre-set trading strategies and real-time market conditions, especially during periods of rapid price movement.

The warning comes as regulators increase scrutiny of crypto market infrastructure and trading practices. The Financial Supervisory Service said it will enhance exchange-level monitoring systems and establish more precise surveillance standards for API-driven orders.

The move signals a shift toward closer supervision of algorithmic trading in digital asset markets, as automated strategies play a growing role in liquidity and price formation.