Cryptocurrency policy in South Korea has undergone significant transformation in 2025, influenced by political dynamics, market pressures, and systematic efforts to balance innovation with investor protection. Here is a comprehensive analysis based on recent developments:
๐๏ธ 1. Main Regulatory Framework
- Virtual Asset User Protection Act (Effective July 2024): Focus on preventing market manipulation (e.g., pump-and-dump), obligation to store 80% of assets in cold wallets, and user compensation for service disruptions.
- Second Phase Regulatory Plan (Second Half of 2025): Being designed to include transparency in crypto asset listing on exchanges, stablecoin issuance standards, and alignment of disclosure requirements with traditional finance.
- Tax: 20% capital gains tax on crypto postponed until 2027โthird postponement since 2022โto prevent capital flight and tracking difficulties.
๐ 2. Key Policies 2025
- Institutional Access:
- Charities and universities allowed to open verified crypto accounts (Q2 2025), followed by corporations and professional investors (Q3 2025) through a pilot program.
- "Real-name account" rules expanded to companies, with strict KYC/AML.
- Opening Global Markets: Authorities are designing revisions to AML rules to allow foreign investors to participate, previously hindered by bank account restrictions and capital controls.
- Crackdown on Illegal Exchanges: 17 foreign exchanges (e.g., KuCoin, MEXC) blocked on Google Play/App Store for being unlicensed.
- Bitcoin ETF: Financial Services Commission (FSC) considers legalizing Bitcoin spot ETF, following the models of the US and Japan, despite previously being prohibited.
โ๏ธ 3. Impact of the June 2025 Presidential Election
The early election resulted in a victory for Lee Jae-myung (Democratic Party), promising pro-crypto policies:
- Legalizing Spot ETF: Accelerating ETF approvals for investment instrument diversification.
- Major Institutional Investment: Allowing national pension funds ($700 billion AUM) to allocate a small portion to crypto assets.
- Korean Won Stablecoin: Supporting the development of won-based stablecoins to maintain financial sovereignty.
Interestingly, both candidates (including the opposition) support similar policies, indicating bipartisan consensus.
๐จ 4. Law Enforcement and Challenges
- Virtual Asset Crime Division: Special task force established permanently in February 2025, successfully seizing $490 million in illegal assets over 19 months of operations.
- Manipulation Cases: For the first time, pump-and-dump perpetrators were prosecuted under the Virtual Asset User Protection Act.
- Security Threats: Joint warning from the US-Japan against Lazarus Group hacking (North Korea) targeting exchanges like Upbit.
๐ฎ 5. Prospects and Criticism
- Opportunities:
- Strict Singapore and Hong Kong may divert capital to South Korea.
- Korea Blockchain Week 2025 (September) becomes a catalyst for the global industry.
- Criticism:
- Policies considered "rushed" ahead of the election, risking neglecting their risks.
- Regulatory inconsistencies during the Yoon Suk-yeol era (e.g., tax delays, slow response to Terra-LUNA case) undermine market confidence.
๐ Important Regulatory Timeline
| Year | Policy | Main Impact |
| 2018 | Trading restricted to real-name bank accounts | Minors and foreigners prohibited from trading |
| 2020 | ISMS certification and AML reporting | Only major exchanges (Upbit, Bithumb) qualify |
| 2024 | Virtual Asset User Protection Act | Deposit protection and market manipulation prosecution |
| 2025 | Gradual institutional access, opening global markets | Companies and foreign investors can participate |
๐ก Conclusion
South Korea's crypto policy in 2025 is moving towards institutional integration and market globalization, driven by election pressures and regional competition. While investor protection is tightened (e.g., criminal prosecutions, blocking illegal exchanges), corporate access and spot ETFs open new capital flows. Future challenges include the stability of the legal framework under a new government and mitigating cross-border cybersecurity risks. With 16 million investors (24% of the population), these policies will significantly impact Asia's digital economy. $TKO #SouthKoreaCryptoPolicy
