Financial Regulator Deploys AI to Monitor Crypto Market 24/7

South Korea’s financial regulator has launched an artificial intelligence-based surveillance system to detect market manipulation and other forms of unfair trading in the cryptocurrency market in real time.

The Financial Supervisory Service (FSS) said on Aug. 20 that it has developed an AI-powered market surveillance system combining generative AI with machine-learning algorithms. The system is designed to address the limitations of monitoring thousands of crypto assets traded around the clock across multiple exchanges with a limited number of investigators. The FSS first developed an algorithm in January to identify price-manipulation suspects and periods in which they influenced orders and prices. It has now expanded the use of AI to cover the broader market-surveillance process.

A key feature of the new system is its ability to detect short-term price manipulation. Based on past investigations, the FSS has classified major manipulation patterns and uses the system to screen assets in real time. These include “racehorse” schemes, in which prices are rapidly pushed higher during specific periods, and “cage” schemes, in which prices of assets subject to deposit and withdrawal restrictions experience sharp swings. Both are considered forms of pump-and-dump activity.