South Korean experts are suggesting the use of artificial intelligence (AI) to combat the risks associated with crypto pump and dumps. They believe that implementing an AI-powered “prior detection system” would provide protection for investors. These experts voiced their opinions during a seminar titled “The Present and Future of Cryptoasset Regulation,” hosted by lawmaker Kim Seong-won of the People’s Power Party. Despite the upcoming launch of the Virtual Asset User Protection Act on July 19, the speakers expressed concerns that it would not be sufficient to safeguard crypto traders in South Korea. They urged the government and industry to utilize AI and other tools to fight against pump and dump schemes, which involve manipulating prices. Chae Sang-mi, a professor at Ewha Womans University, highlighted the vulnerability of crypto markets to these types of manipulation attempts. Pump and dump schemes involve coordinated efforts by groups of individuals to purchase little-known tokens, spread rumors and fake news about them online, and then sell the coins to unsuspecting buyers. The goal is to create sudden price spikes and generate profits for the schemers while causing losses for those who fell for the hype. These schemes have been problematic in South Korean markets, particularly with low-cap altcoins. Chae explained that researchers have been working on AI-powered solutions for detecting abnormal transactions associated with pump and dump schemes. These solutions can automatically detect such schemes when information is spread through social media platforms like Twitter. They can also determine the success of attempted pumps. Additionally, new AI tools can identify trends, such as increased purchases of USDT related to rises in the price of Bitcoin. Chae’s team has developed a predictive model using machine learning and AI technology, which could serve as the foundation for preventative measures against pump and dump schemes. Another expert, Hwang Seok-jin from Dongguk University, emphasized the need for AI-powered abnormal transaction detection systems in the crypto market. Currently, players and regulators rely on post-facto detection methods that often come too late to prevent market manipulation. Jeong Jae-wook, a partner at Joowon Law Firm, mentioned the legal limitations that hinder the fight against crypto price manipulation, stating that there is a national consensus that regulators struggle to respond effectively to incidents in the cryptoasset sphere. Lawmaker Kim expressed hope that the Virtual Asset User Protection Act would guide the market towards a safer environment.
