South Korea’s financial regulators are preparing to freeze cryptocurrency accounts without warning—and without needing permission from a court first. The Financial Services Commission is reviewing a system that would let authorities lock down accounts belonging to suspected market manipulators before they can move their profits to private wallets. Think of it like catching someone with their hand in the cookie jar before they can run away and hide the cookies.
South Korea plans warrantless cryptocurrency account freezes to catch market manipulators before they can hide their illegal profits.
Currently, authorities need court warrants to freeze accounts, which creates delays. During those delays, suspects can transfer their cryptocurrency to personal wallets where tracking becomes much harder. The proposed system would immediately block withdrawals, transfers, and any payments on flagged accounts. Some brokers and platforms already restrict certain post-market actions during extended trading windows to limit similar risks, highlighting operational precedents for immediate intervention limit orders.
This approach isn’t entirely new for South Korea. The country already uses similar tools for stock market enforcement. In September 2024, a Joint Task Force froze 75 accounts involved in stock manipulation worth about 100 billion won. Those early freezes prevented roughly 40 billion won in illicit gains from disappearing. Regulators then prepared fines reaching double the illegal profits.
What triggers these freezes? Authorities look for suspicious patterns like coordinated buying before price spikes, automated bot trading, purchasing at inflated prices to boost values artificially, and rapid profit-taking after manipulation schemes. Wash trading—fake trades that create false volume—also raises red flags. Manipulation tactics can generate large unrealized gains within minutes, necessitating quicker reaction instruments than currently available.
The proposal faces significant criticism though. Without warrant requirements, concerns about judicial oversight and due process have emerged. Critics worry innocent traders might get caught in the net since clear definitions of market manipulation remain fuzzy. Some characterize the proposal as political posturing rather than solid regulatory framework. The National Tax Service warned that crypto assets in cold wallets remain within enforcement reach, citing authority to conduct home searches and seize offline storage devices in tax cases.
The stakes are real. Over 110 billion dollars in crypto assets left South Korean exchanges by 2025 because traders found the regulations too restrictive. Discussions between the FSC and Bank of Korea started in November 2024, but disagreements delayed implementation until 2026. No formal legislative proposals have reached lawmakers yet.
The second phase of crypto legislation would also establish stablecoin rules and broader market abuse controls, creating a more complete regulatory picture for digital assets.
