South Korea Pushes Early Account Freezes to Stop Crypto Abuse
- FSC seeks early crypto payment freezes to stop illegal profits before they move off.
- Wallet and bank transfers hinder recovery, prompting freezes to preserve gains early.
- Capital Markets Act precedents guide phase two crypto law expansion for enforcement.
South Korea’s financial regulators are moving to freeze suspect crypto accounts earlier to block illegal profits before they vanish. The Financial Services Commission discussed the measure in November 2025 during a meeting on virtual asset price manipulation cases. The proposal targets suspects who move funds quickly through wallets and banks, frustrating investigations and asset recovery.
FSC Targets Enforcement Gaps in Crypto
At the November meeting, the Financial Services Commission reviewed limits within the Virtual Asset User Protection Act. Officials noted delays when prosecutors must first secure court warrants to seize suspected criminal proceeds. During that window, suspects often transfer assets beyond reach.
Commissioners pointed out that payment freezes can be used to stop withdrawals, transfers, and payments early on. The goal is to keep potential profits locked in place while investigations are still underway. This approach reflects concern that current rules only block exchange deposits and withdrawals.
However, funds can still move to personal wallets or financial institutions. Once transferred, tracking becomes difficult, according to financial authority officials. As a result, regulators see early freezes as necessary to prevent concealment.
During the meeting, members referenced prior cases involving automated trading and coordinated buying. Suspects used repeated trades, high-price purchases, and rapid profit-taking. These tactics generated illegal gains before authorities could intervene.
Commissioners agreed existing crypto controls remain incomplete. They emphasized securing assets earlier to support later confiscation and fines. This discussion set the stage for aligning crypto enforcement with capital market practices.
Capital Markets Act Model and Crypto Policy Direction
The FSC meeting also reviewed precedents under the Capital Markets Act. In April 2025, lawmakers amended the act to allow payment suspensions for suspected stock manipulation. Authorities applied that power months later.
In September, the Joint Stock Price Manipulation Eradication Task Force froze 75 accounts. The case involved a coordinated group accused of manipulating shares worth roughly 100 billion won. Officials called it the first domestic use of preemptive payment suspensions. At the time, suspects had mobilized about 100 billion won.
They earned roughly 40 billion won in market profits. Half remained unrealized through unsold shares. Financial authorities froze both realized and unrealized profits. This step prevented liquidation during the investigation. Officials then prepared fines up to 80 billion won which is double the estimated gains.
Notably, regulators also worked with prosecutors and courts to recover principal funds. They sought confiscation of the original 100 billion won used. The case demonstrated how early freezes can secure assets before formal charges.
During the FSC meeting one commissioner described the stock case as decisive. Others agreed similar authority could strengthen crypto enforcement. This comparison guided discussions on future legislation.
Related: South Korea’s Crypto Whales Surge Past 10,000 Investors
Phase Two Crypto Law Expands Preventive Controls
Following the meeting, officials discussed incorporating payment suspensions into phase two virtual asset legislation. Several commissioners urged lawmakers to adopt provisions resembling capital market rules. They stressed early-stage action rather than post-violation recovery.
Financial authority representatives noted crypto’s unique risks. Virtual assets move faster than stocks and cross platforms easily. Transfers to private wallets complicate tracing and enforcement. Currently, regulators can block transfers between exchanges. However, withdrawals to banks remain possible.
Officials said closing that gap would help preserve evidence and assets. According to financial authorities, payment freezes would restrict all outbound fund movements. This includes bank transfers linked to suspect accounts. Such measures aim to stop concealment during investigations.
Importantly, officials framed the proposal as a preliminary preservation step. It would support later fines and confiscation orders. Commissioners emphasized coordination with prosecutors and courts. The FSC continues reviewing how much of the Capital Markets Act can apply. Discussions focus on unfair trading provisions relevant to crypto markets.
Lawmakers expect these points to shape the next legislative draft. South Korea’s Financial Services Commission is actively considering the system. Officials confirmed discussions remain ongoing following the November meeting. Further details will depend on legislative progress.
Meanwhile, South Korea’s Financial Services Commission considering early payment freezes indicates a shift toward closing enforcement gaps in crypto market investigations. The proposal notes concerns that existing exchange-only controls fail once funds move to wallets and banks. It also demonstrates how regulators plan to preserve unrealized gains earlier to support later fines and asset recovery.
