Fifteen lawmakers from South Korea’s ruling People Power Party, led by Kim Sang-hoon, filed an amendment on July 28 that would let the Financial Intelligence Unit order crypto exchanges to freeze accounts suspected of moving illegal funds. The bill sets fines of up to 100 million won, about $72,000, for exchanges that don’t comply immediately.
How the Amendment Would Expand FIU Freeze Powers
The amendment targets the Act on Reporting and Use of Certain Financial Transaction Information, per a report from Bloomingbit. It redefines “account” to include the unique ID number a crypto exchange assigns each user, putting exchange accounts under the same freeze powers as bank accounts.
Under the proposal, the FIU could request a payment suspension on any bank or crypto account tied to suspected illegal transfers, for up to 30 days with one 30-day extension. Exchanges would have to act the moment they receive the request, with no review period built in.
Current law limits this kind of freeze to a narrow set of crimes, like voice phishing and unfair trading in capital markets, so an exchange holding funds tied to an investment scam or illegal loan can’t be ordered to freeze that account today. The new bill removes that fixed list, letting the FIU freeze any account tied to illegal transfers, including drug trafficking, gambling and newer phishing schemes.
What This Means for Crypto Exchange Users in South Korea
If the bill passes, exchanges operating in South Korea, not just banks, would be legally required to freeze a user’s account the moment the FIU flags it, with no advance warning to the account holder. That freeze could lock the account’s funds for up to 60 days, blocking withdrawals and transfers while the FIU investigates, and the exchange would have no discretion to refuse or delay the request.
This bill adds to a bigger transition in how South Korean regulators treat crypto activity, as seen in Kyobo’s move into tokenized bonds earlier this year. Unlike a licensing rule, this amendment gives the FIU a direct lever to freeze any account in real time, so routine trading activity could draw the same scrutiny as large institutional transfers.
Why the Six-Month Delay Matters for Exchanges
If passed, the bill would take effect six months after it is signed into law, giving exchanges a window to build out the compliance systems needed to act on FIU freeze requests immediately, as the bill requires. The amendment still has to clear committee review and a full National Assembly vote before that clock starts, so the six-month runway only begins once lawmakers pass it, not from the July 28 filing date.
South Korean financial firms have had to move fast on crypto rules before, as Kbank’s Ripple-powered payments rollout showed earlier this year.
What this means for you: If this bill becomes law, a South Korean exchange could freeze your account for up to 60 days without warning if regulators suspect it’s tied to illegal funds, so keeping clear records of where your crypto came from and where it’s going will matter more than ever.
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