In a significant departure from its previous stance, South Korea’s Financial Services Commission (FSC) has announced a gradual approach to reinstating corporate participation in the cryptocurrency market. This decision, unveiled during the third assembly of the Virtual Asset Committee, signals the beginning of a new regulatory framework aimed at integrating digital assets into the nation’s financial landscape. The change comes after years of stringent restrictions aimed at preventing market manipulation and money laundering since the nationwide ban on institutional trading in 2017.
The FSC’s strategy involves a phased rollout that prioritizes the involvement of specific entities first. Starting in 2025, government organizations, non-profit entities, and cryptocurrency exchanges will be authorized to conduct crypto transactions strictly for liquidation purposes. By mid-2025, around 3,500 registered professional investment firms and publicly traded corporations are expected to join a pilot program allowing them access to crypto trading. The careful pacing of this initiative reflects the FSC’s dual focus on fostering innovation while minimizing financial risks associated with digital asset trading.
The legislative landscape has evolved following the introduction of the Virtual Asset User Protection Act in July 2024. This act provides a crucial regulatory foundation for expanding institutional involvement in the cryptocurrency sector. The FSC has acknowledged the growing interest among domestic businesses in blockchain technology, as major global economies have increasingly opened their markets to institutional cryptocurrency trading. To address potential risks, the FSC is set to implement robust anti-money laundering (AML) frameworks, enforce independent custody requirements, and mandate full disclosures from corporate clients. Banks and exchanges will undertake thorough evaluations of corporate applicants, ensuring adherence to financial regulations.
One of the critical issues that the FSC plans to confront is the rampant price volatility triggered by the swift introduction of new cryptocurrencies on local exchanges. To mitigate this, the commission intends to establish stricter listing criteria along with greater transparency measures. These regulations are essential for curbing market manipulation and fostering a more stable trading environment for both consumers and corporations. Taking proactive steps to maintain integrity within the market, the FSC is keen to build public trust in the cryptocurrency ecosystem.
In tandem with these developments, the meeting addressed legislative efforts to regulate tokenized securities under South Korea’s Capital Markets Act. Proposed amendments would recognize financial instruments based on distributed ledger technology, potentially paving the way for deeper integration of blockchain solutions within the country’s traditional banking framework. Collaboration across various sectors—financial regulators, banking associations, and crypto exchanges—will be pivotal in finalizing the new regulations.
This critical juncture in South Korea’s approach to cryptocurrency indicates a momentous shift towards a regulated and vibrant digital asset market, but the ultimate level of corporate participation will be shaped by ongoing regulatory assessments and prevailing market dynamics.