Korean regulators strike again: Virtual asset price manipulation cases will lead to account freezes to prevent the transfer of illegal proceeds

South Korean financial authorities are strengthening regulation of the virtual asset market. The Financial Services Commission plans to explore the introduction of a “payment suspension” system, which would proactively freeze accounts suspected of price manipulation in virtual asset cases, restricting withdrawals, transfers, and payments to limit outflows of funds. This new system is expected to be promoted within the “Second Phase Legislation of Virtual Assets,” aiming to prevent suspects from transferring or concealing illicit gains during investigations.

Core Content of the New System

The idea was proposed at the Financial Services Commission’s routine meeting in November 2025. According to the latest news, the system will reference practices in the capital markets regarding stock price manipulation, implementing early freezing measures on accounts suspected of manipulating virtual asset prices.

Why is this system needed

The current system has obvious loopholes. Confiscation or recovery of illegal proceeds from virtual assets usually requires investigation by prosecutors and a court order before enforcement. During this process, suspects have ample time to transfer assets to personal wallets or other channels to conceal them, leading to low law enforcement efficiency.

Financial authorities believe that once virtual assets are transferred into personal wallets, they are easier to hide. This makes early asset freezing measures particularly important. The new system can restrict fund outflows early in the investigation, ensuring that illegal gains are not transferred before trial.

Benchmarking against practices in the capital markets

Regulatory Trend Signals

This move reflects Korea’s ongoing strengthening of virtual asset market regulation. Data also indicates this trend: according to the latest disclosures, only 2 virtual asset service provider licenses were approved by Korea’s Financial Intelligence Unit (FIU) in 2025, down from 4 in 2024 (including DSRV, INEX, B-DAX, Dolphin).

This suggests increasing regulatory standards and rising market entry barriers. Coupled with the promotion of the payment suspension system, it shows that Korean financial authorities are reinforcing the regulation of the virtual asset market from multiple dimensions.

Potential Market Impact

The advancement of the new system may have several effects:

• Significantly increasing the costs of price manipulation, with manipulators facing earlier asset freezing risks
• Virtual asset exchanges needing to develop more robust risk control systems to meet regulatory requirements
• Market participants’ compliance awareness needing further enhancement
• Licensed service providers potentially consolidating their competitive positions

Summary

Korean financial authorities are drawing on mature practices from the capital markets to gradually improve the regulation of virtual assets. From the promotion of the payment suspension system, the second phase legislation of virtual assets, to the decline in license applications, this represents a systematic upgrade of regulation. While beneficial for the long-term healthy development of the market, it may impose higher compliance requirements on market participants in the short term. Monitoring the specific content and timetable of Korea’s “Second Phase Legislation of Virtual Assets” will help understand the regulatory direction of major Asian markets.