South Korea expands cryptocurrency oversight based on artificial intelligence

South Korea is prioritizing real-time monitoring.

The Financial Supervisory Service (FSS) of South Korea — the nation’s main financial regulator — has significantly upgraded its cryptocurrency market oversight capabilities by deploying an extensive AI-based monitoring system designed to detect market manipulation in real time.

The upgraded system, internally called “ CryptoWatch AI 2.0 ”, builds upon the existing CryptoWatch platform launched in 2023 and now integrates advanced machine learning models capable of analyzing millions of on-chain and off-chain transactions per second across major licensed exchanges ( Upbit, Bithumb, Coinone, Korbit, GOPAX ) and emerging DeFi protocols accessible to Korean users.

The focus of this pilot program

Behavioral analysis — Track clusters of individual and institutional wallets using graph analysis and clustering algorithms to flag coordinated activity across exchanges.

Cross-exchange correlation — Simultaneous monitoring of order books and trading flows across all five major South Korean exchanges to detect arbitrage abuse or fraudulent trading in the form of multi-platform activity.

Natural Language Processing (NLP) — Scan Korean social media networks (KakaoTalk groups, Naver Café, DC Inside cryptocurrency forum) and Telegram channels for coordinated pump-and-dump signals or insider leaks.

Combining on-chain and off-chain data — Integrating blockchain data (via Chainalysis and local analytics partners) with centralized exchange KYC information to link anonymous wallets to real identities.

FSS said the system flagged more than 1,200 suspicious samples in the first month of its expanded rollout (December 2025 – January 2026), resulting in 47 formal investigations and 12 accounts frozen pending further review.

Domestic project impact

For domestic exchanges, enhanced oversight will raise compliance standards . Platforms will need tighter internal oversight, reporting standards, and a framework for collaboration with regulators. Failure to respond promptly to flagged activities could result in penalties or license risks.

For traders —especially those involved in high-frequency and high-volume trading—the message is clear: shady activities or boundary-breaking maneuvers are harder to conceal, even in rapidly volatile markets.

The FSS initiative mirrors supervisory tools that have long been used in South Korea's stock and derivatives markets. By applying similar standards to cryptocurrencies, regulators are normalizing digital assets as part of the financial system, rather than treating them as an unregulated sector.

Assessment and Conclusion

The Federal Security Service's (FSS) deployment of CryptoWatch AI 2.0 to detect market manipulation in real time is a bold move, reflecting South Korea's commitment to protecting its vast number of individual cryptocurrency users while maintaining one of the world's most stringent regulatory environments. By combining on-chain analytics, cross-exchange monitoring, and natural language processing (NLP) across social media channels, South Korea is building the world's most advanced cryptocurrency market surveillance system.

While short-term traders may face increased scrutiny (and the risk of error), the long-term effects will be positive: a more transparent market will attract more institutional investment and minimize fraud. As domestic platforms gain greater liquidity and foreign access becomes increasingly restricted, South Korea's regulated exchanges could emerge as one of the largest and most reliable cryptocurrency markets worldwide.

Disclaimer: The information presented in this article is the author's personal opinion in the field of cryptocurrency. This is not financial or investment advice. All investment decisions should be based on careful consideration of your personal portfolio and risk tolerance. The views expressed in this article do not represent the official stance of the platform. We recommend that readers conduct their own research and consult with experts before making any investment decisions.

Compiled and analyzed by HCCVenture

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