South Korea Considers Preemptive Freezing of Crypto Accounts Linked to Market Manipulation

Source: DefiPlanet Original Title: South Korea Considers Preemptive Freezing of Crypto Accounts Linked to Market Manipulation Original Link:

Quick Breakdown

• South Korea is considering freezing crypto accounts suspected of price manipulation before funds are moved
• Regulators want crypto enforcement tools similar to those used in the stock market
• The move is part of a broader push to tighten oversight and protect investors

South Korea’s financial regulators are weighing a proposal that would allow authorities to freeze cryptocurrency accounts suspected of price manipulation before illicit profits can be moved or laundered.

According to a Tuesday report by local outlet Newsis, the Financial Services Commission (FSC) is reviewing a payment suspension mechanism that would block transactions tied to suspected market abuse. The proposal would bring crypto enforcement closer in line with measures already used in the country’s stock market.

Crypto enforcement may mirror stock market rules

Under the proposed system, regulators could temporarily halt crypto transactions linked to suspected manipulation, such as front-running, wash trading, or placing large artificial buy orders, without first obtaining a court warrant.

Currently, authorities must secure judicial approval before freezing crypto assets, a process regulators say creates a critical delay. That lag can give bad actors enough time to move funds into private wallets or obscure transaction trails, making recovery far more difficult.

The FSC has argued that faster intervention is necessary, noting that unrealized gains from manipulation can vanish quickly once trades are unwound. South Korea amended its Capital Markets Act in April 2025, allowing authorities to freeze accounts suspected of unfair trading or illegal short selling, a framework now being considered for digital assets.

Part of a wider regulatory clampdown

The proposal signals South Korea’s broader push to tighten crypto oversight and align digital asset markets with traditional finance standards.

In October, the National Tax Service warned that crypto holdings stored in cold wallets are not immune from seizure, citing its authority to conduct home searches and confiscate offline storage devices in tax evasion cases.

More recently, in December, the FSC explored imposing bank-level liability on crypto exchanges. Under that idea, platforms could be required to compensate users for losses caused by hacks or system failures, even in cases where no direct negligence is proven.

Together, these efforts reflect a shift toward more proactive regulation, building on the country’s first phase of crypto laws focused on user protection. A second legislative phase is expected to introduce stablecoin rules and tougher controls on market abuse, though formal proposals have yet to be unveiled.