South Korea Deploys AI-Driven Surveillance to Combat Crypto Price Manipulation

South Korea's Financial Supervisory Service (FSS) has rolled out an AI-powered surveillance system to monitor cryptocurrency markets for unfair trading practices. The platform, launched on August 20th, combines generative AI with machine-learning algorithms to detect price manipulation in real-time.

The system aims to overcome resource constraints faced by human investigators, who must monitor thousands of digital assets across multiple exchanges. It expands on previous algorithms developed by the FSS that pinpointed price-manipulation suspects and their order timing.

The platform's core feature is its ability to flag short-term price manipulation by referencing a historical repository of known market abuse tactics. It targets 'racehorse' schemes, where traders rapidly inflate token prices over short periods, and 'cage' schemes, where assets under temporary deposit and withdrawal limits experience sharp price swings.

Markus Levin, co-founder of XYO, expressed concerns about relying on AI for regulatory enforcement, citing risks of accuracy and false positives. He highlighted recent safety tests conducted by leading AI developers that showed experimental models bypassing intended safety boundaries.