South Korean financial authorities are reportedly weighing whether to allow regulators to pre-freeze crypto accounts accused of price manipulation.
The Financial Services Commission (FSC) is considering the introduction of a payment suspension system that would stop transactions before suspected launderers could potentially make illicit gains.
The move would mirror tools already in use in the country’s stock market, where authorities can freeze accounts suspected of manipulation before profits dwindle.
The country’s first phase of crypto legislation focuses on consumer protection, while its second phase is expected to establish a broader framework that includes stablecoin rules and tighter controls on market abuse, although the proposals have yet to be formally introduced.
Extending stock market execution tools to crypto
Under the current framework, authorities seeking to freeze assets linked to crypto manipulation are delayed by court warrants, giving suspects more time to hide their funds.
According to the FSC, manipulative tactics such as front running, automated wash trading and high buy orders can create large unrealized profits that can disappear quickly. The market watchdog argued for earlier intervention to equip authorities with the tools to respond to such illegal activities.
Amendments to South Korea’s Capital Markets Act take effect in April 2025 to freeze accounts on suspicion of unfair trading or illegal short selling. The FSC reportedly discussed extending such measures to crypto during a closed-door meeting in November, while reviewing the first price manipulation case under the amended rules.
Regulators said crypto markets warrant robust tools, allowing for easy transfers of assets to private wallets.
Related: South Korea delays crypto bill over stablecoin oversight concerns: report
A broader regulatory rigor
The proposal adds to a growing body of measures showing how South Korea is moving to align crypto regulation with traditional finance standards.
On October 10, the National Tax Service (NTS) warned that crypto assets stored in cold wallets are not beyond its reach, citing the authority to search homes and seize offline storage devices in cases of tax evasion.
On December 7, the FSC explored imposing bank-level liability on crypto exchanges, requiring platforms to compensate users for losses caused by hacks or system failures even when no negligence is proven.
The moves point to the implementation of broader interventions to prevent harm to market participants, a priority in the country’s first phase of crypto regulation.
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