S. Korea orders exchanges to freeze debtor crypto within 7 days

South Korea’s Supreme Court has proposed amendments to the Civil Execution Rules that would require virtual asset service providers, including crypto exchanges, to identify and freeze assets linked to debtors within seven days of receiving a court order. The public consultation period closes on Aug. 11 and the draft rules are slated to take effect Oct. 1.

Under the draft, courts could attach a debtor’s right to receive assets held by a custodian rather than immediately seizing tokens. Once a provider is served with an order, it would be barred from transferring the corresponding assets to the debtor and the debtor would lose the ability to dispose of that claim. Creditors could ask a court to require the provider to disclose holdings.

A provider would have seven days to confirm whether it recognizes the debtor’s claim, identify the types and quantities of assets, and report any competing seizures, provisional orders or priority rights. After assets are identified and frozen, a court could assign them to creditors or order liquidation. The provider could be authorized to execute a sale, or assets could be moved to an enforcement officer’s account or converted into more liquid forms before disposal.

The draft distinguishes between custodial holdings and assets controlled directly by a debtor. For assets held through exchanges or custodians, attaching the right to receive the assets and requiring disclosure would allow prompt freezing and transfer. For assets controlled by private keys, a court can prohibit disposal and order transfer to an enforcement officer, but seizure only takes effect when the officer actually receives the assets.

The proposed procedure would apply to proceedings already underway when the rules take effect. If the timetable holds, exchanges and other providers would have roughly seven weeks after the Aug. 11 consultation deadline to prepare operational and legal processes before an Oct. 1 start date.

The proposal forms part of a wider set of legal changes for virtual assets in South Korea. Authorities have introduced statutory protections for users, tightened exchange registration and anti-money-laundering requirements, and indicated plans to extend the travel rule and add controls for personal wallets and stablecoins.

The rules could reach a large share of domestic crypto accounts. As of February 2025, 16.29 million people held accounts across South Korea’s five largest exchanges, about 32% of the population; by comparison, roughly 14.2 million people held domestic listed stocks at the end of 2024.