South Korea Mulls Freezing Unrealized Crypto Gains to Curb Manipulation
South Korea’s financial authorities are reportedly weighing whether to allow regulators to preemptively freeze crypto accounts suspected of price manipulation.
The Financial Services Commission (FSC) is reviewing the introduction of a payment suspension system that would block transactions before suspects launder potentially illicit gains, local outlet Newsis reported Tuesday.
The measure would mirror tools already used in the country’s stock market, where authorities can freeze accounts suspected of manipulation before profits are cashed out.
The nation’s first phase of crypto legislation focused on user protection, while its second phase is expected to establish a broader framework that includes stablecoin rules and stricter controls on market abuse, though the proposals have yet to be formally introduced.
Extending stock market enforcement 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 conceal their funds.
According to the FSC, manipulation tactics such as front-running, automated wash trading and high buy orders can generate large unrealized profits that can quickly disappear. The market watchdog argued for earlier intervention to equip authorities with the tools to respond to such illicit activities.
South Korea’s amendments to its Capital Markets Act went into effect in April 2025 to introduce account freezes on those suspected of unfair trading or illegal short sales. The FSC reportedly discussed extending such measures to crypto during a closed-door meeting in November, while reviewing the first price manipulation case under amended rules.
Regulators said crypto markets warrant stronger tools, given the ease with which assets can be transferred into private wallets.
Related: South Korea delays crypto bill over stablecoin oversight concerns: Report
A broader regulatory tightening
The proposal adds to a growing body of measures that show how South Korea is moving to align crypto regulation with traditional finance standards.
On Oct. 10, the National Tax Service (NTS) warned that crypto assets stored in cold wallets are not beyond its reach, citing its authority to conduct home searches and seize offline storage devices in tax evasion cases.
On Dec. 7, the FSC explored imposing bank-level liability on crypto exchanges, requiring platforms to compensate users for losses stemming from hacks or system failures even when no negligence is proven.
These measures point to enforcement shifting to broader intervention to prevent harm to market participants, a priority set in the nation’s first phase of crypto regulation.
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