South Korean Experts Advocate Utilizing AI to Prevent Crypto Pump and Dump Schemes
South Korean experts are raising concerns about the persistence of crypto pump and dump schemes and are proposing the adoption of an AI-powered “prior detection system” to safeguard investors. According to reports from Enews Today, these experts shared their insights during a seminar titled “The Current and Future Landscape of Cryptoasset Regulation,” hosted by lawmaker Kim Seong-won from the People’s Power Party.
The discussion took place in anticipation of the implementation of the Virtual Asset User Protection Act, scheduled to be enforced from July 19. Despite this upcoming regulation, the speakers highlighted the inadequacy of the act in ensuring the protection of crypto traders in South Korea. Some experts suggested that both the government and the industry utilize advanced tools like AI to combat price manipulation tactics associated with pump and dump schemes.
Professor Chae Sang-mi from the Department of Business Administration at Ewha Womans University emphasized the continued susceptibility of crypto markets to pump and dump manipulation attempts. These schemes typically involve coordinated efforts by groups of individuals to purchase low-cap and lesser-known tokens, followed by the spread of rumors and misinformation online to attract buyers, leading to sudden price spikes. While generating substantial profits for the orchestrators, unsuspecting investors who fall for the hype end up facing losses.
In response to these challenges, Chae highlighted the ongoing development of AI solutions designed for detecting abnormal transactions, particularly in cases of pump and dump schemes promoted through social media channels such as Twitter. These AI-powered tools not only identify such manipulation attempts but also assess their effectiveness. Additionally, these technologies can recognize patterns, like the correlation between increases in USDT purchases and Bitcoin price hikes, as well as the surge in Twitter bot activity during price pumps. Chae and their team have leveraged machine learning and AI capabilities to build a predictive model, laying the groundwork for preventive measures against pump and dump schemes.
Echoing similar sentiments, Professor Hwang Seok-jin from Dongguk University’s Graduate School of International Information Security emphasized the necessity of AI-driven abnormal transaction detection systems within the crypto market to enhance surveillance and intervention capabilities, moving beyond traditional post-incident detection methods that often prove inadequate in preventing market manipulations.
Further complicating the situation, Jeong Jae-wook, a partner at Joowon Law Firm, pointed out legal constraints hindering effective responses to crypto price manipulation incidents. Jeong highlighted the challenges posed by these legal limitations and the pressing need for proactive measures in combating such illicit activities within the crypto sphere. Lawmaker Kim expressed hope that the forthcoming Virtual Asset User Protection Act would steer the market towards a more secure environment.