South Korea Weighs Freezing Unrealized Crypto Gains to Crush Price Manipulation Before Cash-Outs

Key Takeaways:

• South Korean regulators are reviewing a plan to freeze crypto accounts holding unrealized gains tied to suspected price manipulation.
• The proposal would block withdrawals and transfers early, mirroring tools already used in stock market enforcement.
• The measure may be folded into Phase Two of Korea’s crypto law, signaling tighter alignment with traditional finance rules.

South Korea’s financial authorities are moving closer to a tougher stance on crypto market abuse. Regulators are now considering whether to preemptively freeze accounts linked to suspected price manipulation, even before profits are realized or withdrawn. The proposal reflects growing concern that current enforcement tools move too slowly in fast-moving crypto markets, allowing illicit gains to vanish into private wallets.

Read More: South Korea to Impose Bank-Level Liability on Crypto Exchanges After Upbit’s $30M Hack

Regulators Target Unrealized Profits, Not Just Cashed-Out Gains

According to a report by local outlet Newsis, the Financial Services Commission (FSC) is positively reviewing the introduction of a “payment suspension” system for crypto-related offenses. The mechanism would allow authorities to freeze accounts suspected of market manipulation at an early stage.

A payment suspension blocks withdrawals, transfers, and payments, effectively locking funds in place. In crypto cases, this would prevent suspects from moving assets off exchanges or converting them into fiat while investigations are still underway.

The idea surfaced during a closed-door FSC meeting last November while officials were reviewing a price manipulation case involving digital assets. Regulators acknowledged a critical enforcement gap: under current rules, authorities must wait for court-issued warrants to seize or preserve assets, often after suspects have already moved their funds.

Market manipulation tactics cited by officials include front-running, repeated automated trades, aggressive high-price buying, and rapid profit-taking. These methods can generate large unrealized gains that disappear quickly once assets are sold or transferred.

One FSC official noted that preemptive freezes could function as a first line of defense, stopping suspicious profits from being concealed before formal seizure procedures begin.

Borrowing Enforcement Tools From the Stock Market

The proposed crypto account freeze would closely mirror powers already available in South Korea’s equity markets.

In April last year, amendments to the Capital Markets Act introduced payment suspension orders for stock manipulation cases. Those tools were used in a high-profile enforcement action last September, when regulators froze 75 accounts linked to a large-scale stock price rigging scheme.

Read More: South Korea Warns ETFs’ Crypto Exposure Too High, Coinbase, MicroStrategy in the Crosshairs

The proposal is applicable in the changing crypto framework in South Korea. The initial stage of legislation governing digital assets in the country was extremely user protection-oriented, exchange protection-oriented, and disclosure-oriented.

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