South Korea’s Evolving Crypto Investment Regulations
South Korea Signals a Shift in Institutional Crypto Investment Policies
Recent developments indicate that South Korea is poised to relax its constraints on institutional cryptocurrency investments. The Financial Services Commission (FSC) of South Korea, through its Secretary-General, has revealed intentions to reassess these restrictions in light of the country’s evolving regulatory framework.
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FSC’s Strategic Move to Enhance Institutional Crypto Engagement
According to a report from Yonhap News Agency, FSC’s Secretary-General Kwon Dae-young unveiled plans to permit legal entities to engage in cryptocurrency investments starting this year. Kwon emphasized the regulatory body’s objective to ease limitations on institutional crypto trading and investment to bolster collaboration between traditional financial institutions and fintech innovators.
The FSC is contemplating a proposal to facilitate the issuance of real-name accounts to corporations, a practice currently restricted. Such accounts are imperative for virtual asset investments as per the Specified Financial Transaction Information Act. Despite no explicit legal prohibitions, financial authorities have previously advised banks against issuing these accounts to corporations.
As outlined in the FSC’s “Major Work Plan for 2025,” this policy shift will be implemented gradually. Initially, the focus will be on enabling non-profit organizations to participate through the Virtual Asset Committee, with a broader rollout to follow. The FSC is also advancing the second phase of the Virtual Asset User Protection Act, which includes regulatory measures for digital asset distribution.
Aligning with Global Crypto Standards
The FSC’s Secretary-General highlighted the necessity of establishing listing standards, managing stablecoins, and formulating rules for virtual asset exchanges. The South Korean government aims to align its policies with international crypto regulations. Additionally, plans are underway to introduce a screening system to assess the eligibility of major shareholders in virtual asset companies, achieved through amendments to the Special Financial Transactions Act.
To enhance investor protection, the FSC is focusing on improving self-regulation by setting criteria for reviewing memecoins and other cryptocurrencies. Furthermore, forensic tools will be introduced to scrutinize illicit trading activities.
The Transforming Crypto Landscape in South Korea
In recent years, South Korea has been transitioning towards a more structured and secure investment environment. Jeong Eun-bo, Chairman of the Korea Exchange, has advocated for a paradigm shift in how lawmakers and financial institutions perceive crypto assets. Jeong proposed that integrating virtual assets into institutional finance could rejuvenate the market, generate additional value, and enhance the country’s competitive edge on the global stage.
There has been criticism of the FSC’s stance on virtual assets, with some arguing it hampers market development and international competitiveness. However, the establishment of the Virtual Asset Committee marks a significant step towards advising and shaping industry-related policies. This committee is set to reevaluate the longstanding prohibition on crypto-based investment products.
Jeong also announced plans for exploring crypto exchange-traded funds (ETFs) by 2025, following significant challenges faced by the country’s capital markets in 2024. Additionally, the government has deferred the implementation of its crypto taxation policy by two years. Initially slated for January 2025, the policy intends to levy a 20% capital gains tax on digital asset trades, now expected to take effect in 2027.
