South Korea Deploys AI to Police Crypto Market Manipulation
South Korea's Financial Supervisory Service (FSS) has deployed an AI-powered market surveillance system to detect unfair trading and price manipulation in cryptocurrency markets. The system combines generative AI with machine-learning algorithms to track suspicious activity.
The initiative aims to overcome the limitations faced by human investigators, who must monitor thousands of digital assets across multiple exchanges 24/7. The new platform expands on algorithms developed by the regulator in January that pinpointed price-manipulation suspects and their order timing.
A key feature of the system 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.
Despite human oversight remaining central to the process, industry observers have expressed skepticism about relying on AI for regulatory enforcement. Markus Levin, co-founder of XYO, raised concerns about ensuring these systems operate on accurate, trustworthy data and questioned whether AI models can remain within clearly defined operational boundaries.