South Korea wants to be able to intervene more quickly in suspicious crypto activities

The South Korean government is working on new measures to more effectively tackle abuse in the crypto market. Financial regulators are investigating whether they can preventively freeze crypto accounts when there is a suspicion of price manipulation. The country wants to prevent suspects from moving their digital assets before authorities can intervene.

According to the Financial Services Commission (FSC), South Korea’s main financial regulator, current legislation is inadequate. Due to legal procedures, it often takes too long before accounts can be blocked, causing potentially illegal profits to disappear from view.

Ability to temporarily block transactions

The FSC is investigating the introduction of a system that allows payments and transactions to be temporarily suspended. This would allow regulators to immediately halt suspicious crypto transactions, before money can be laundered or transferred to private wallets.

A similar measure already exists in the South Korean stock market. There, accounts of people suspected of market manipulation can be frozen until it is clear whether illegal trading is taking place. The regulator now wants to examine whether this approach is also suitable for crypto.

According to the FSC, the crypto market is particularly vulnerable to manipulation. Digital assets can be moved quickly and easily, often without the intervention of central parties. This makes it difficult to intervene afterwards.

Common manipulation techniques include artificially inflating prices, buying and selling the same cryptocurrency at the same time, and insider trading. Such practices can generate large profits in a short time, which disappear just as quickly. Early intervention is therefore considered increasingly important.

Legislation does not yet match practice

Under current crypto laws, South Korean authorities rely on court orders to freeze assets. That process takes time and offers suspects space to secure their money.

At the same time, the rules on traditional financial markets have already been further developed. Since April 2025, accounts may be blocked if there are suspicions of unfair trading or illegal short selling. During a closed meeting in November, the FSC discussed whether these powers should also be applied to the crypto market.

Part of broader regulation of crypto

The possible measure fits within a broader strategy by South Korea to more strictly regulate the crypto sector. The National Tax Authorities previously announced that crypto assets in cold wallets are not beyond its scope. If tax evasion is suspected, even offline storage devices can be confiscated.

In addition, the FSC investigated in December whether crypto exchanges should be held liable at a comparable level to banks. In that case, platforms would have to compensate users for losses due to hacks or technical glitches, even if there is no negligence.

Focus on prevention and protection of investors

The recent proposals show that South Korea is shifting its focus from solely user protection to active and preventive enforcement. By intervening more quickly and strictly, the government wants to limit damage to investors and increase confidence in the crypto market.

With this course, South Korea is trying to bring the crypto sector more and more into line with the traditional financial world, where market abuse is given less room and transparency is central.