Key Highlights
- South Korea’s FSS rolls out AI-powered surveillance to detect crypto market manipulation and protect investors in real time.
- FSS strengthens IT rules, corporate crypto oversight, and accountability for executives to prevent tech and financial risks.
- Following Bithumb errors, FSS cracks down on scams, enhances user protections, and introduces AI-driven early warning systems.
South Korea’s Financial Supervisory Service (FSS) unveiled a stringent 2026 plan on February 9 to strengthen cryptocurrency market oversight. The initiative aims to tackle high-risk trading practices that disrupt market order.
As per a local report, it will specifically monitor methods like “big whale” trades, “fence” operations, and “racehorse” price spikes, all of which manipulate virtual asset prices using large capital or timing strategies. High-frequency trading abuses and fraudulent social media campaigns are also in focus.
FSS intends to use advanced artificial intelligence (AI) technology as well as real-time analytics in detecting suspicious activities. Using sub-second price changes, it will automatically identify manipulative transactions that were previously beyond human observation. This is a significant move from using manual checks towards using AI surveillance, signifying the regulator’s desire to keep up with dynamic crypto.
AI surveillance with VISTA
To support this effort, the FSS recently deployed the Virtual Assets Intelligence System for Trading Analysis (VISTA). Developed by its Virtual Asset Investigation Bureau, VISTA uses a sliding window grid search algorithm to spot suspicious trading periods and price manipulations. Consequently, the system breaks down transactions into sub-second intervals, offering unmatched precision.
“The system has already identified all suspicious intervals in closed cases and uncovered additional manipulative actions,” officials said. By incorporating high-performance GPUs and CPUs, the FSS can process large datasets faster, ensuring traders cannot exploit loopholes in crypto exchanges. Besides, VISTA strengthens consumer protection while promoting market transparency.
Expanding regulations and IT risk management
Apart from trading, the FSS will step up rules to prevent tech problems in financial companies. Firms that have IT issues could face fines, and top executives like CEOs and security officers will be held more accountable. Banks and exchanges will need to track their tech equipment, find weaknesses, and fix serious problems quickly. Additionally, the new FIRST system will gather and share cyber threat information across the entire financial sector.
Another sector that the FSS will be in charge of is corporate crypto investment, owing to the lifting of the nine-year corporate crypto ban in South Korea. This means that publicly traded companies can now invest up to 5% of their capital in the top 20 different cryptocurrencies. This ensures that they bring in big money while still keeping the speculative risks under control. The government has yet to decide whether stablecoins such as USDT are included.
Strengthening user protections
At the same time, the FSS is cracking down on financial scams that hurt users, like phone phishing and payment mistakes. The recent Bithumb incident, where Bitcoin transactions went wrong, triggered an urgent response from the agency.
As per the FSS release, officials discussed compensations, internal control inspections, and ledger verification improvements. FSC Chairman Lee instructed officials to monitor user damages and progress of on-site inspections.
Additionally, AI will support early detection of voice phishing, while cooperative systems with police ensure quick investigation transitions. The regulator also plans dedicated deposit products for prepaid funds to protect users of payment gateway companies.
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