South Korea Considers Freezing Unrelated Virtual Gains to Combat Manipulation

The Proposal Reflects South Korea's Efforts to Align Crypto Regulations with Securities Market Standards

Financial authorities in South Korea are exploring the possibility of allowing regulators to preemptively freeze cryptocurrency accounts suspected of price manipulation. The Financial Services Commission (FSC) is reviewing the introduction of a payment suspension system that would block transactions before suspects can launder potentially illicit gains, according to a report by the local publication Newsis.

This measure would mirror tools already used in the country's securities market, where authorities can freeze accounts suspected of manipulation before profits are realized. The first phase of crypto legislation in South Korea focused on user protection, while the second phase is expected to establish a broader framework, including rules for stablecoins and tighter controls on market abuse, although these proposals have yet to be officially introduced.

Currently, authorities wishing to freeze crypto assets related to manipulation face delays due to judicial mandates, giving suspects more time to hide their funds. According to the FSC, manipulation tactics such as front-running, automated trading, and large buy orders can generate substantial unrelated profits that can quickly disappear.

The proposal adds a new element to a growing body of measures indicating how South Korea is moving towards aligning crypto regulations with traditional financial standards. On October 10, the National Tax Service (NTS) warned that crypto assets stored in cold wallets are not beyond its reach, invoking the authority to conduct home searches and confiscate offline storage devices in cases of tax evasion.