South Korea’s financial oversight authorities are reportedly contemplating whether to allow regulators to preemptively freeze cryptocurrency accounts linked to suspected market manipulation.

The Financial Services Commission (FSC) is reviewing the implementation of a payment suspension system designed to halt transactions before suspects can cash out potentially illicit profits, as reported by local news outlet Newsis on Tuesday. This proposal reflects a similar mechanism already in use within the country’s stock market, where regulators can freeze accounts under suspicion of manipulation prior to the realization of profits.

Extending Stock Market Enforcement to Crypto

Under the current regulations, authorities face delays from court orders when attempting to freeze assets associated with crypto manipulation, granting suspects extra time to hide their assets. The FSC noted that manipulation strategies, such as front-running and automated wash trading, could lead to significant unrealized profits that may vanish quickly. The regulatory body has called for more immediate measures to equip authorities to respond to these illicit activities.

Amendments to South Korea’s Capital Markets Act came into effect in April 2025, enabling account freezes for those suspected of unfair practices or illegal short selling. Recent closed-door meetings in November included discussions on extending these provisions to cryptocurrencies while reviewing the nation’s first price manipulation case under new regulations.

According to regulators, the transferability of crypto assets into private wallets necessitates stronger tools for oversight.

Wider Regulatory Tightening

This proposal is part of an expanding series of regulations aimed at aligning cryptocurrency oversight with traditional financial standards in South Korea. On October 10, the National Tax Service (NTS) highlighted its capability to target crypto assets stored in cold wallets, asserting its authority for home searches and the ability to seize offline storage devices in tax evasion investigations.

Further, on December 7, the FSC evaluated implementing bank-level liabilities on crypto exchanges to ensure that platforms would compensate users for losses due to hacks or systemic failures, even if no negligence is proven.

These initiatives indicate a shift towards broader interventions necessary to protect market participants, a priority established during the initial phase of crypto regulation.