South Korea’s FSC Proposes Payment Freeze System to Combat Crypto Manipulators - A Regulatory Game-Changer
South Korea's Financial Services Commission just dropped a regulatory bombshell—a proposed payment freeze system designed to hunt crypto market manipulators. This isn't just another guideline; it's a direct strike at the shadowy tactics that have plagued digital asset trading.
The Regulatory Hammer Drops
The FSC's blueprint targets the very mechanics of manipulation. The proposed system would allow authorities to halt suspicious transactions mid-flow, cutting off the lifeblood of pump-and-dump schemes and spoofing operations before profits can vanish into the blockchain ether. It's a preemptive strike, moving beyond post-crime prosecution to real-time intervention.
How the Freeze Would Work
Imagine a coordinated attack on a low-cap token. Under the new rules, regulators could identify the orchestrated buy-in and freeze the associated fiat payment channels before the manipulators can cash out their artificially inflated gains. It bypasses the slow chase across anonymous wallets and goes straight for the off-ramp—the point where crypto meets traditional money.
The Industry's Tightrope Walk
For exchanges and payment processors, this means building new compliance infrastructure overnight. They'll need systems to interface directly with regulators, likely automating freezes based on predefined triggers. It's a costly dance between innovation and oversight—another line item for the finance department, because nothing says 'market integrity' like a hefty compliance bill.
A Global Ripple Effect
South Korea isn't playing small ball. As a top-five crypto market, its regulatory moves send shockwaves. Other jurisdictions, from Japan's FSA to European watchdogs, will be dissecting this model. Could this become the global standard for tackling wash trading and fake volume? Quite possibly.
The proposal now enters a public commentary period. Expect lobbyists from both sides—the 'regulation-is-stifling' crypto libertarians and the 'protect-the-retail-investor' advocates—to battle it out. The FSC's final rule could either be a scalpel or a sledgehammer. One thing's certain: the days of manipulating Korean markets with impunity are numbered. After all, what's the point of a perfectly executed pump if you can't even buy a latte with the profits?
FSC proposes a payment freeze to prevent virtual asset losses
At the FSC meeting, the committee noted that, under the current Virtual Asset User Protection Act, the confiscation or recovery of unlawful gains from virtual assets typically requires a prosecutor’s investigation. The Commission also noted that seizing illegal gains from virtual assets requires a court warrant, which raises the risk of assets being transferred during this time period.
One committee member cited the mechanism for suspending payments for accounts suspected of stock manipulation. The suspension of payments was implemented through the modification of the Capital Markets Act in April of last year.
In September of last year, the Joint Stock Price Manipulation Eradication Task Force uncovered the “first scandal” and suspended payments to 75 accounts in a 100 billion won stock price manipulation case involving a coalition of affluent individuals. The scandal was the first domestic case handled by the joint task force against stock manipulation, involving the preemptive freezing of accounts suspected of unfair trade.
At the time of suspension, the alleged offenders had mobilized around 100 billion won and generated 40 billion won in market profits. Of this, 20 billion won was realized, with the remaining 20 billion won as unsold stocks. The financial regulators froze the accounts, preventing gains from being withdrawn.
The Joint Stock Price Manipulation Eradication Task Force was formed in July of last year. The task force includes officials from the FSC, the Financial Supervisory Service (FSS), and the Korean Exchange. The task force was formed to detect and investigate illegal and unfair stock trading practices, a key policy emphasized by President Lee Jae Myung.
During the meeting, the member in question stated, “The suspension of payments on 75 accounts in Case No. 1 was very strong,” adding, “That way, we can freeze unrealized profits so they cannot be sold.” It WOULD be beneficial to have a comparable suspension scheme in the Virtual Assets Act.”
Newsis, a local news outlet, disclosed that during the meeting, a member commented that suspension of payments is a first step to collection and preservation, so it would be prudent to undertake it in advance. The member urged the committee to consider how many of the provisions in the Capital Markets Act on unfair trade practices can be represented in the Phase 2 Virtual Assets Act bill,” reaching an agreement.
The local news outlet reported that some committee members argued that such a system is even more crucial in the case of virtual assets, which are particularly easy to conceal once transferred to personal wallets.
Cyptopolitan revealed that between 2020 and September of last year, FSC froze crypto assets worth $18.9 million in 30,106 cases.
The smartest crypto minds already read our newsletter. Want in? Join them.
