Regulators in South Korea Consider Blocking Unrealized Crypto Gains

TLDR

• South Korea is considering a plan to freeze crypto accounts suspected of market manipulation.
• The Financial Services Commission is reviewing a payment suspension system for digital assets.
• This system would allow regulators to block transactions before profits are moved or hidden.
• Current procedures require court approval, which delays enforcement and enables fund transfers.
• The proposed measure is similar to rules already used in the country’s stock market.

South Korea is reviewing stronger measures to counter crypto price manipulation, including freezing accounts before suspects cash out unrealized gains, according to officials, and regulators may soon apply rules that currently exist in the stock market to digital assets, as part of a broader plan to align crypto oversight with traditional finance.

Authorities Consider Payment Suspension Measures

The Financial Services Commission (FSC) is evaluating new tools to preemptively block transactions linked to suspected market abuse.
Officials said this could prevent criminals from moving funds into cold wallets before investigations begin or warrants are issued.

Currently, courts must approve asset freezes, giving suspects time to shift funds or obscure their holdings.
The FSC argues that this delay weakens enforcement and enables manipulation tactics like front-running and wash trading.

“Profits from unfair practices can disappear quickly before action is taken,” said an unnamed FSC official, as reported by Newsis.
By blocking these transfers earlier, regulators believe they can preserve evidence and disrupt illegal trades.

The proposed system mirrors existing measures under South Korea’s Capital Markets Act, which was amended in April 2025.
That legislation allows freezing of accounts involved in illegal short-selling or unfair trades in traditional securities.

Crypto Oversight Expands Beyond User Protection

The first phase of South Korea’s crypto law emphasized user safety and exchange accountability, setting standards for custody and transparency.
In its second phase, the focus is shifting to broader enforcement, market integrity, and anti-manipulation tools.

Regulators held a closed-door meeting in November to discuss applying payment suspension powers to crypto trading.
This meeting occurred while reviewing a suspected manipulation case under the amended Capital Markets Act.

The FSC emphasized the unique risks in crypto markets, particularly the rapid transfer of assets to private wallets.
They stated that this mobility challenges traditional investigation timelines and weakens post-trade enforcement.

Regulators are considering faster interventions to freeze funds during ongoing probes.
This would mirror how suspicious activities are blocked in the securities market without waiting for a court ruling.

South Korea Targets Crypto Hacks and Liabilities

In December, the FSC examined whether crypto exchanges should bear full liability for hacks and system failures.
Under this proposal, exchanges would compensate affected users even if they were not directly negligent.

The National Tax Service (NTS) also warned in October that cold wallets could be subject to home searches and asset seizure.
This move aims to counter attempts to conceal taxable assets through offline storage.

South Korea is gradually applying financial standards from traditional markets to the crypto sector.
The FSC is preparing legal grounds to introduce transaction blocking measures specific to digital assets.

These reviews and proposals are part of an expanding enforcement approach.
They indicate an effort to enable faster and more direct action against crypto-related financial crimes.

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