South Korea Pursues Early Payment Freezes to Combat Crypto Market Manipulation

Source: CryptoTale Original Title: South Korea Pushes Early Account Freezes to Stop Crypto Abuse Original Link:

Overview

South Korea’s Financial Services Commission is advancing measures to freeze suspect crypto accounts earlier in investigations, aiming to prevent illegal profits from being transferred and hidden. The proposal emerged from FSC discussions in November 2025 regarding virtual asset price manipulation enforcement.

Current Enforcement Challenges

The FSC identified critical gaps in existing Virtual Asset User Protection Act provisions. Current regulations only restrict deposits and withdrawals at exchanges, but suspects can still transfer funds to personal wallets or traditional financial institutions, making asset tracking extremely difficult.

During investigations, suspects often move funds rapidly through multiple channels before authorities can secure court-ordered seizures. This window of opportunity allows illegal gains to become concealed, hindering both investigation and asset recovery efforts.

Proposed Solution: Early Payment Freezes

Commissioners proposed implementing preemptive payment suspension authority that would:

• Restrict all outbound fund movements from suspect accounts
• Block transfers to personal wallets and linked bank accounts
• Preserve both realized and unrealized profits during investigations
• Support subsequent confiscation and fine proceedings

This approach aims to lock assets in place early rather than attempting recovery after concealment occurs.

Capital Markets Act Precedent

The FSC referenced successful implementation of similar measures under the Capital Markets Act. In September 2025, authorities froze 75 accounts in a coordinated stock manipulation case involving roughly 100 billion won in suspected illegal gains. The freeze preserved both realized profits (40 billion won) and unrealized gains (unsold shares), enabling regulators to pursue confiscation of the original 100 billion won used in the scheme and prepare fines up to 80 billion won.

Commissioners described this case as demonstrating how early asset preservation strengthens enforcement outcomes and suggested similar authority could enhance crypto market oversight.

Legislative Direction

Official discussions indicate phase two virtual asset legislation will likely incorporate payment suspension provisions modeled on capital market rules. Key considerations include:

• Addressing crypto’s faster asset mobility compared to traditional markets
• Coordinating with prosecutors and courts on implementation
• Balancing preventive controls with due process protections
• Determining scope of applicable Capital Markets Act provisions for crypto enforcement

Lawmakers expect these enforcement principles to shape the next legislative draft. The FSC continues reviewing implementation details, with further developments dependent on legislative progress.