In its bid to reposition itself as a crypto hub, South Korea is looking at easing policies to accommodate institutional buyers.
South Korea is poised to ease its previously strict stance on cryptocurrency trading, marking a significant policy shift. This comes as the country’s Financial Services Commission (FSC) plans to lift its de facto ban on local institutions participating in crypto markets. This significant move, promises to reshape the landscape for digital asset investments in South Korea.
South Korea’s Gradual Shift in Policy
For years, South Korea’s crypto space has been tightly controlled, with institutional investors largely kept out of the market. Although individual retail traders, after completing a rigorous verification process, could trade crypto. Impressively, the country’s crypto retail trading has gained massive traction.
Institutional players were advised by the FSC to avoid engaging with crypto exchanges. This situation, while not an outright ban, has stifled the potential for larger-scale institutional participation.
Now, the FSC plans to reverse this policy. Working alongside the Digital Asset Committee, FSC is drafting a comprehensive strategy to ease these restrictions gradually. The agency plans to start with non-profit organizations before eventually expanding to broader institutional access.
The move is seen as a strategic effort to bolster South Korea’s standing in the global digital asset market. It marked a departure from years of cautious regulatory oversight. This shift comes in line with President Yoon Suk-yeol’s promise to revitalize the country’s cryptocurrency market.
The ruling People Power Party, under Yoon’s leadership, remains a major advocate for the adoption of blockchain technology and digital currencies. A key component of this vision remains the push for local crypto exchange-traded funds (ETFs).
This initiative remains absent in South Korea despite the widespread adoption by other countries and entities. The adoption of digital product investment could boost investor confidence and market liquidity. By lifting the restrictions on institutional crypto trading, South Korea is preparing to position itself as a competitive crypto hub.
This policy change signals a welcoming environment for crypto-focused innovation, aiming to attract foreign and domestic institutional investors.
Plans to Strengthen Regulatory Frameworks
In tandem with the policy overhaul, the FSC is working on a follow-up to the Virtual Asset Investor Protection Act, which passed in 2024. This move shows the government’s commitment to ensuring market integrity.
The second phase of this legislation aims to establish more comprehensive rules covering stablecoins, crypto exchanges, and token listings. The aim is to create a more transparent and regulated crypto space that can accommodate institutional investors while safeguarding retail traders.
The FSC is also planning amendments to the Financial Information Act, particularly targeting the major shareholders of virtual asset service providers. The introduction of a screening system for these shareholders will ensure that the crypto ecosystem remains free of dubious players and maintains financial integrity.
Similarly, several countries have shifted their stance on crypto, moving from skepticism or regulation-heavy approaches to more open and welcoming policies. Many now recognize the potential of crypto and adapt their rules to encourage growth in the sector.
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