South Korea plans preemptive crypto account freezes to curb money laundering, market manipulation, and illegal fund transfers.
South Korean financial authorities are moving fast to change how they police digital assets.
Reports from 6 January indicate that the Financial Services Commission (FSC) is weighing a major policy change.
This plan involves “preemptive” crypto account freezes, which would allow regulators to stop transactions the moment they suspect any price manipulation.
Currently, the law requires court warrants to block assets, but this delay often gives criminals enough time to move money into private wallets or offshore accounts.
As a bottom line, the FSC wants to close this window.
Crypto Account Freezes And Stock Rules
The proposed system borrows directly from the Capital Markets Act.
In the traditional stock market, authorities can freeze accounts that they suspect of illegal short sales or unfair trading.
South Korea’s long awaited crypto law (Digital Asset Basic Act) has been further stalled as regulators mull over who can issue won-pegged stablecoins.
Bank of Korea is of the opinion that only banks with 51% ownership can issue stablecoins however the Financial Services… pic.twitter.com/Py12Hfp6zf
— Sapna Singh (@AdvSapna_) January 5, 2026
These rules were updated in April of last year, and now, the FSC believes the crypto market needs the same level of protection. Historically, market manipulation often happens through wash trading or high buy orders.
These tactics create fake demand and unrealised profits and suspects sometimes hide these gains before an actual probe even starts.
Stopping Funds Before They Reach Private Wallets
The main challenge for the FSC is the nature of blockchain technology. Unlike bank accounts, crypto wallets do not always require a central authority to function.
If a suspect moves Bitcoin to a hardware device, it becomes nearly impossible to seize remotely.
The new development would target centralised exchanges first and Virtual Asset Service Providers (VASPs) would have to comply with these freeze orders immediately.
This plan is part of the second phase of national crypto legislation, with the first phase focused mostly on protecting users. As such, this new phase creates a framework for stablecoin rules and controlling market abuse.
Urgency Driven by Recent Financial Scandals
Several major incidents have also pushed the government to act. For example, the 2022 Terra-LUNA collapse is still a fresh memory for many Korean investors.
That event exposed massive gaps in market oversight.
Regulators have also spotted a rise in “smurfing” tactics, where criminals break large sums into tiny transfers. Usually, transfers under 1 million won (about $680) experience less strict rules, and the FIU reported more than 36,000 suspicious transactions early last year.
NEW: Terra Founder Do Kwon just wrapped up his guilty plea in New York court to two counts of conspiracy and fraud
The plea deal sets up Do Kwon on a path to be sent back to Korea after what could be as little as 6 years
Here’s how it went down in the courtroom 🧵 pic.twitter.com/xLqxmxR6Zu
— Zack Guzmán ♻️ (@zGuz) August 12, 2025
Nearly 90% of these were linked to illegal foreign remittance schemes, which are locally known as “hwanchigi.” As such, the government wants to end these loopholes by tracking all movements, regardless of size.
Related Reading: South Korea FIU Fines Korbit $1.9 Million Over AML Violations
A Push for Financial Alignment
This proposal is just one part of a larger crackdown. South Korea wants crypto to meet bank-level standards and the National Tax Service recently warned that cold wallets are not safe from the law.
They now have the authority to search homes and seize offline storage devices in tax cases.
The FSC is also exploring bank-level liability for exchanges. They want platforms to pay users for losses from hacks or system failures.
This would apply even if the exchange was not directly negligent.
These steps show that the country is moving actively towards preventing harm before it happens.