Right now, officials are talking about this as part of the country’s next round of digital asset laws. The goal is to give regulators more ways to step in quickly when things look shady in these fast-moving markets.
Here’s how it could work. The Financial Services Commission (FSC) wants the power to slap a temporary “payment freeze” on any crypto account or wallet flagged for things like price manipulation or money laundering.
In essence, if there are negative activities, they will block users from transferring, withdrawing, or concealing profits until the investigation is completed. Supporters claim that this addresses a gap in the previous regulations that allowed for illicit behaviour.
Why the Move Now?
The pressure on South Korea’s crypto regulators is building. Crypto markets operate on a whole other timeline than current regulations.
Currently, for South Korean crypto regulators to freeze the crypto assets of a crime suspect, they must first obtain a court order.
This involves legal paperwork and can take weeks. In the meantime, suspects can transfer their assets between various crypto exchanges, private wallets, and other storage methods, making it difficult for regulators to trace the assets.
Officials say they need to step in sooner if they want to protect investors and keep the market fair.
As one put it, “Profits from unfair practices can disappear quickly before action is taken.” Local media picked up that quote, and honestly, it sums up the challenge pretty well.
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Stock Market Precedent
South Korea is already doing something like this in regular finance. When they updated the Capital Markets Act in April 2025, regulators got the green light to freeze assets in securities accounts if they suspect shady trading or illegal short-selling.
Not long after, you had that headline case at the end of 2025, where the Joint Response Team to Eradicate Stock Price Manipulation locked up 75 accounts tied to a 100 billion won scam (about $75 million).
That move stopped people from pulling out any profits, whether they’d cashed out or not.
Now, the folks working on crypto rules keep pointing to that case. They say it proves that giving regulators similar power in the digital asset world actually works, and maybe it’s even more important, since crypto is way easier to move around and hide than old-school securities.
What the Proposed System Would Do
If regulators roll out this system, they can:
- Freeze transactions from accounts flagged for manipulation or other shady activity while they investigate.
- Allow financial authorities to get an early shot at blocking suspects from cashing out gains that haven’t been realised yet.
- Borrow ideas from the enforcement powers already in place for South Korea’s securities market, but tweak them for virtual assets.
For crypto exchanges and VASPs, this means teaming up more closely with regulators and handing over real-time data when needed.
The plan calls for authorised agencies to work with banks and trading platforms to lock down suspicious funds fast, which is the same way they already freeze stocks.
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