South Korea Targets ‘Unrealized’ Crypto Gains With Pre-Indictment Freeze
South Korean regulators aim to mirror stock market ‘payment freezes’ for crypto, blocking manipulators from withdrawing funds before a warrant is issued.
FSC Moves to Close the ‘Investigation Gap’
South Korea’s Financial Services Commission (FSC) is advancing a ‘payment suspension’ system designed to freeze crypto accounts suspected of market manipulation before a court warrant is issued. According to local industry reports released Tuesday, the measure aims to mirror existing mechanisms in the Capital Markets Act, preventing bad actors from liquidating flash-pump profits while prosecutors build their case.
The proposal, discussed during a closed-door meeting in November, targets a critical latency in the current enforcement pipeline. Under existing South Korean law, authorities must secure a judicial warrant to freeze assets, a delay that often allows manipulators to wash funds through mixers or move capital offshore. The new system would empower regulators to lock accounts immediately upon detection of unfair trading practices, such as wash trading or high-frequency spoofing.
The industry explained that there is a strong need to introduce the payment suspension system applied to accounts suspected of stock price manipulation to the virtual asset market as well. BloomingBit Report
The $110 Billion Context
The regulatory tightening comes as Seoul struggles to retain domestic liquidity. A joint study by CoinGecko and Tiger Research revealed that $110 billion (approx. 160 trillion KRW) fled South Korean exchanges for offshore platforms in 2025. Strict domestic curbs on derivatives and leverage have pushed volume to foreign venues like Binance and Bybit.
Regulators now face a two-front war: stemming capital flight caused by restrictive product offerings while simultaneously deploying aggressive tools to catch manipulators exploiting the remaining spot market volatility. If enacted, the payment freeze would be one of the most aggressive pre-trial enforcement tools in the APAC region.
Implementation is expected to be included in the upcoming ‘second phase’ of virtual asset legislation, currently under review.
