South Korea may soon have a new tool to stop crypto investors from quickly cashing out profits during investigations. Regulators are exploring a “payment freeze” system designed to prevent suspicious crypto gains from being withdrawn or hidden before authorities take action.

Why Regulators Are Concerned About Crypto Profits

According to local reports, the Financial Services Commission (FSC) discussed this measure in November while reviewing a virtual asset price manipulation case. Officials say the current rules create a loophole: authorities must obtain a court warrant during prosecution to seize assets, which can take time.

In fast-moving crypto markets, suspects often use this delay to transfer funds to private wallets or overseas exchanges, making it harder to recover the profits.

Investigators have seen schemes like front-running, wash trading, repeated high-priced orders, and coordinated profit-taking. Some gains remain unsold on exchanges, but others can be withdrawn immediately once prices peak.

A preemptive freeze, regulators argue, would stop suspects from turning unrealized profits into cash before formal charges are filed.

Learning from the Stock Market

The proposed crypto measure is modeled on tools already used in South Korea’s stock market. In April 2025, amendments to the Capital Markets Act allowed authorities to suspend payments on accounts suspected of unfair trading or illegal short selling.

The law was first applied in September 2025 in a 100 billion won stock manipulation case, freezing 75 accounts of wealthy investors and professionals. About 40 billion won in gains were involved, half of which had not yet been sold. FSC officials now see this approach as a potential model for crypto enforcement.

Crypto Regulation Enters a Stricter Phase

South Korea’s first crypto law, the Virtual Asset User Protection Act (July 2024), focused mainly on investor protection and reporting suspicious activity. While exchanges gained obligations to monitor trades, regulators could not freeze assets before a legal case was opened.

The upcoming second phase of crypto legislation is expected to tackle stablecoins, market abuse, and gaps in enforcement, giving authorities stronger tools to act earlier.

Enhanced Oversight and AI Surveillance

The government is ramping up supervision across both traditional and digital markets. In July 2025, a Joint Response Unit between the Financial Supervisory Service and the Korea Exchange was established to accelerate investigations of major manipulation cases.

Advanced AI surveillance systems are also being deployed to detect repeat offenders and manipulation driven by media coverage.

Beyond trading abuse, regulators are reviewing stricter rules for crypto exchanges, including bank-level liability standards, after the $30 million hack at Upbit.

Officials emphasize that these steps show a shift toward treating digital assets with the same seriousness as traditional financial products, signaling a more aggressive approach to crypto oversight in South Korea.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry risks, and readers should conduct their own research before trading or investing.