South Korea enters new era of crypto market oversight with AI-powered monitoring
A combination of enhanced surveillance technology, volatility investigations and a groundbreaking criminal conviction demonstrates South Korea's intensified approach to cryptocurrency market regulation.
Regulatory authorities in South Korea are intensifying their supervision of the country's cryptocurrency trading landscape, demonstrating a more rapid and synchronized methodology for identifying questionable market behavior as volatility returns to the sector.
This increased regulatory attention came into focus when South Korea's Financial Supervisory Service (FSS) announced its examination of dramatic price fluctuations affecting the ZKsync token on the Upbit platform, after significant volatility occurred during a period coinciding with scheduled system maintenance, as reported by The Korea Economic Daily (Hankyung).
According to the FSS, authorities are conducting data analysis and may elevate the examination to an official investigation based on what they discover.
Legal professionals and FSS representatives quoted by Hankyung characterized the situation as representative of the current regulatory response to abrupt price movements. Rather than focusing on individual occurrences, the emphasis has shifted toward reinforcing infrastructure and establishing clearer guidelines for exchanges functioning as essential market infrastructure.
Cointelegraph reached out to Upbit operator Dunamu for comments, but did not get a response before publication.
Faster detection and earlier escalation
The effort by South Korea to enhance cryptocurrency market supervision has coincided with recent modifications to legislation and monitoring capabilities.
On Monday, the FSS announced the expansion of its artificial intelligence deployment for digital asset trading surveillance, enhancing its internal cryptocurrency intelligence platform to autonomously identify potential market manipulation across various temporal periods.
According to the regulatory body, this system minimizes dependence on human-led examinations and allows for quicker identification of questionable trading periods. Future enhancements under consideration include capabilities to identify synchronized trading networks and track the source of capital employed in suspected manipulation schemes.
Authorities have also demonstrated readiness to take action more quickly. On Jan. 6, domestic news outlets reported that the Financial Services Commission (FSC) was considering frameworks to allow proactive asset freezing to stop the laundering of criminal proceeds connected to ongoing investigations.
From surveillance to enforcement
This monitoring initiative arrives as judicial bodies start implementing criminal sanctions under South Korea's cryptocurrency investor protection legislation.
On Wednesday, the Seoul Southern District Court allegedly issued its inaugural imprisonment penalty under the Virtual Asset User Protection Act, finding guilty a cryptocurrency executive, known only by the surname Lee, of market manipulation involving a digital asset traded on domestic platform Bithumb.
Based on Hankyung's reporting, the court imposed a three-year prison term on the executive, determining that systematic purchasing at elevated prices and selling at reduced prices, combined with the submission of misleading purchase orders, amounted to market manipulation.