South Korea Goes Minority Report on Crypto Markets

South Korea is living in the future, with a crypto surveillance system reminiscent of Minority Report, the sci-fi film built around technology used to identify suspicious behavior before authorities intervene. On August 20, 2026, the Financial Supervisory Service (FSS) launched an initiative to utilize AI in its crypto surveillance. The system identifies potentially suspicious trading activity and helps regulators decide whether further investigation is warranted.

The AI flags signs of short-term market manipulation, abnormal trading distributions, wash trading, and illegal front-running patterns. It then analyzes news and announcements to determine whether external events could explain the unusual price action.

The platform utilizes generative AI and machine learning models with real-time trading data and publicly available qualitative data. When suspicious activity is identified, the system can flag transactions requiring more in-depth analysis.

An FSS representative stated: 

"By building an AI-based market surveillance system, we intend to respond swiftly to increasingly intelligent and complex unfair trading in virtual assets, even with limited personnel."

The Bank of Korea’s 2025 Payment and Settlement Report, released in April 2026, illustrates the scale of South Korea's crypto market. Average daily virtual-asset trading volume in South Korea reached 11.8 trillion won in January 2025, before falling to 3.2 trillion won in June. Trading rebounded to 7.2 trillion won in July following the passage of the GENIUS Act in the United States, before declining again to 2.7 trillion won by the end of the year.

Despite the decline in trading activity, the number of investor accounts across the five exchanges continued to grow, reaching approximately 21.63 million by the end of 2025. The value of crypto assets held on domestic exchanges also stood at approximately 81.7 trillion won at year-end.

Stablecoin activity was also substantial. South Korean investors held more than 870 billion won in stablecoins by year-end 2025, with holdings increasing sharply after October.

Upbit, operated by Dunamu, and Bithumb are South Korea's two largest cryptocurrency exchanges.

South Korea's current crypto regulatory framework began taking shape in March 2021, when an amendment to the Act on Reporting and Using Specified Financial Transaction Information took effect. The framework required virtual asset service providers (VASPs) to register with financial authorities and introduced requirements focused primarily on anti-money laundering (AML) and transaction reporting.

The regulatory framework expanded with the passage of the Virtual Asset User Protection Act in July 2023, which took effect on July 19, 2024. The law moved beyond AML requirements to address market conduct, including unfair trading activities such as price manipulation. It also granted regulators authority to investigate unfair trading practices and required virtual asset service providers to maintain insurance or reserves against liabilities arising from incidents including hacks and network failures.

The FSS's new AI initiative represents another evolution in this framework, introducing automated tools to help regulators identify and investigate potential misconduct in crypto markets.

South Korea has also been a recurring target of cryptocurrency-related cyberattacks. A 2019 UN Security Council Panel of Experts report documented multiple attacks against South Korean exchanges in 2017, including two attacks on Bithumb, two on Youbit, and an attack on Coinis. Youbit ultimately declared bankruptcy after its second attack resulted in the loss of 17% of its assets.

More recently, on November 27, 2025, Upbit suffered an unauthorized transfer of approximately $30 million in Solana-network assets. Exchange operator Dunamu said it would cover the losses using company assets. The incident was Upbit's largest reported hack since 2019, when approximately $50 million in Ethereum was stolen from the exchange. 

While the FSS's new system is focused primarily on unfair trading rather than exchange cybersecurity, the country's history of crypto-related attacks provides additional context for South Korea's broader focus on virtual-asset oversight.

South Korea's announcement also comes as global financial regulators are examining how advances in AI could reshape cybersecurity risks. On August 28, in an open letter to G20 Finance Ministers and Central Bank Governors, Financial Stability Board Chair and Bank of England Governor Andrew Bailey warned that frontier AI could materially reshape the scale and nature of cyber risk:

“For the financial system, the most immediate concern is the potential impact of frontier AI on cyber risk. Frontier AI may have the ability materially to alter the speed, scale and economics of cyber risk, which could undermine market confidence system-wide, especially due to highly concentrated third-party service providers. Firms and authorities should be prepared for a threat environment characterised by a higher volume of vulnerabilities and a faster pace of patching, recognising that these dynamics could themselves create operational and resilience challenges if change, testing and recovery processes are unable to adapt safely.”

Overall, South Korea's investment in AI-based surveillance reflects the growing resources being directed toward making crypto markets safer and fairer for participants. As market manipulation, fraud, and cyber threats become increasingly sophisticated, regulators are also adopting more advanced tools to identify and respond to them. At the same time, as Bailey cautioned, AI presents risks of its own. South Korea's initiative highlights both sides of that development, as the same technology creating new challenges for financial markets may also become one of the tools used to protect them. For now, the reality may be less dystopian science fiction and more a question of whether regulators can keep pace with the technology reshaping the markets they oversee.

https://view.asiae.co.kr/en/article/2026041311285711681 (S. Korea 2025 crypto report)

https://view.asiae.co.kr/en/article/2026082010364733778 (FSS quote)
https://fsc.go.kr/eng/pr010101/82683 (press release on crypto legislation)
https://en.yna.co.kr/view/AEN20251127007652320 (Upbit hack info)
https://digitallibrary.un.org/record/3826016/files/S_2019_691-EN.pdf (S. Korea 2017 hacks)
https://www.fsb.org/uploads/P310826.pdf (FSB quotes)