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South Korea weighs preemptive crypto account freezes to curb market abuse

CryptoExpert by CryptoExpert
January 7, 2026
in Regulation
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South Korea weighs preemptive crypto account freezes to curb market abuse
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The proposal would let regulators suspend transactions before gains are laundered or moved.
Authorities want to extend stock market-style enforcement tools to crypto trading.
Recent actions by tax and financial regulators show tighter alignment with traditional finance rules.

South Korea’s financial regulators are reviewing whether to allow transactions to be suspended before suspected price manipulators can move or launder gains.

The idea is to act earlier in fast-moving crypto markets, where profits can be transferred quickly and become harder to trace.

If adopted, the change would mark a significant step in the country’s second phase of crypto regulation, which is expected to expand beyond user protection and address market abuse more directly, alongside work on stablecoin rules that are yet to be formally introduced.

okex

Early intervention tools

The Financial Services Commission, or Financial Services Commission, is reviewing a payment suspension system that would allow regulators to block crypto transactions at an earlier stage.

Local outlet Newsis reported on Tuesday that the proposal would enable authorities to act before suspected manipulators cash out or launder potentially illicit profits.

Under the current framework, freezes often depend on court warrants.

That process can take time, giving suspects room to conceal funds. Regulators argue that crypto markets move faster than traditional assets, making delays more costly.

The proposed system would mirror tools already used in South Korea’s stock market, where accounts linked to suspected manipulation can be frozen before profits are realised.

Closing enforcement gaps

Market watchdogs have flagged specific tactics that can generate large but unstable gains in crypto trading.

These include front-running, automated wash trading, and placing high buy orders that inflate prices.

Such profits can vanish quickly once assets are moved off exchanges.

Regulators say crypto markets require stronger tools because assets can be transferred into private wallets with relative ease. This mobility, they argue, makes early intervention critical.

Lessons from capital markets

South Korea has already expanded its powers in traditional finance. Amendments to the Capital Markets Act, an Capital Markets Act, took effect in April 2025.

These changes allow account freezes for suspected unfair trading or illegal short sales.

According to reports, the FSC discussed extending similar measures to crypto during a closed-door meeting in November.

The talks took place while authorities were reviewing the first price manipulation case handled under the amended capital markets rules.

South Korea adds on regulatory tightening

The proposal builds on a series of measures highlighting South Korea’s effort to bring crypto regulation in line with standards applied in conventional financial markets.

On Oct. 10, the National Tax Service warned that cryptocurrency holdings kept in cold wallets remain subject to enforcement, noting its authority to conduct home searches and seize offline storage devices in tax evasion investigations.

On Dec. 7, the Financial Services Commission examined the idea of applying bank-style liability to crypto exchanges, which would require platforms to compensate users for losses caused by hacks or system failures even in the absence of proven negligence.

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