#SouthKoreaCryptoPolicy 🇰🇷 South Korea's Evolving Crypto Policy
1. Virtual Asset User Protection Act (VAUPA) – Enacted July 2024
The VAUPA serves as South Korea's first comprehensive legal framework for cryptocurrencies, focusing on:
User Asset Protection: Mandates that exchanges store at least 80% of user deposits in cold wallets and segregate them from company funds.
Market Integrity: Prohibits market manipulation and requires surveillance systems to detect and report suspicious activities.
Regulatory Oversight: Empowers the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) to enforce compliance and impose penalties.
2. Cross-Border Crypto Regulations – Effective H2 2025
In response to significant foreign exchange-related crimes, South Korea plans to regulate cross-border virtual asset transactions starting in the second half of 2025. Businesses involved in such transactions will need to register with authorities and report their transactions to the Bank of Korea on a monthly basis.
3. Institutional Participation – Gradual Integration in 2025
The FSC is easing restrictions to allow institutional investors into the crypto market:
Pilot Programs: Starting in early 2025, 3,500 corporations and professional investors will be permitted to open real-name accounts on exchanges.
Charities and Universities: From the second half of 2025, institutions like charities and universities will be allowed to sell crypto donations.
4. Second Phase of Crypto Regulations – Expected Mid-2025
The FSC is developing the second phase of crypto regulations, focusing on:
Service Provider Compliance: Establishing entry requirements, operational guidelines, and measures to prevent conflicts of interest.
Stablecoin Regulation: Creating a separate framework for stablecoin transactions and related business activities.
5. Proposed Reforms by the People Power Party
The ruling party has unveiled a comprehensive plan to overhaul the country’s crypto regulations in 2025, aiming to:
Enhance Competition: Scrap the one-exchange-one-bank rule to allow more competitive partnerships between banks and crypto exchanges.
Legalize Corporate Trading: Permit corporate and institutional trading of digital assets.
Approve Spot Crypto ETFs: Align with trends set by the U.S. and U.K.
Tax Relief: Introduce tax relief for small investors.
Stablecoin Rules: Implement globally aligned stablecoin regulations.
Foster Innovation: Create a basic law to support digital asset growth.