South Korea’s FSS to Intensify Probes Into Unfair Crypto Trading Tied to Issuer Foundations, Bolster AI Surveillance

South Korea’s Financial Supervisory Service will make unfair trading tied to cryptocurrency issuer foundations a priority for inspection and strengthen market surveillance and investigative capabilities using artificial intelligence.

On October 19, the FSS disclosed measures to protect digital-asset users and improve trading order in a business report submitted for the National Assembly audit by the Political Affairs Committee.

The regulator said it will prioritize trading practices that could seriously damage market confidence, including price manipulation involving issuer foundations, and move swiftly to investigate when signs of illegal activity are found. With unfair-trading methods becoming increasingly complex, it aims to sharpen its supervisory system from detecting unusual trading to analyzing suspected violations.

To that end, the FSS will continue upgrading its AI-based monitoring system. It established a real-time market surveillance framework in May and, in August, developed a function that uses AI to identify early on tokens suspected of unfair trading. Earlier, in February, it introduced technology to analyze suspected price-manipulation intervals on a second-by-second basis, and in May added a function to automatically identify suspected groups.

The regulator also revised standards intended to prevent harm to users during advertising and promotional activities by virtual-asset service providers. After setting detailed disclosure standards in February on the provision of financial benefits, it issued guidelines in July for preparing disclosure materials to improve the effectiveness of related best-practice rules.

The FSS also plans to revamp its supervisory framework in preparation for the enactment of the Digital Asset Basic Act. It will refine procedures for monitoring unusual trading and closing investigations, specify disclosure targets and methods, and review measures to impose information-technology stability requirements on virtual-asset service providers comparable to those applied to financial companies, along with sanctions for violations.