South Korea has a strict regulatory framework for cryptocurrencies, focusing on anti-money laundering (AML) and know-your-customer (KYC) compliance. Here are the key aspects of South Korea's crypto policy ¹ ²:

- *Regulatory Bodies*: The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) oversee cryptocurrency regulations, while the Korea Financial Intelligence Unit (KoFIU) handles AML-related matters.

- *Registration and Compliance*: Crypto exchanges must register with the FSC, collaborate with local banks for real-name verification, and implement KYC and AML procedures. Failure to comply can result in severe penalties, including fines and business suspension.

- *User Asset Protection*: The Act on the Protection of Virtual Asset Users (VAUPA) requires virtual asset service providers (VASPs) to:

- *Separate Customer Assets*: Store customer assets separately from their own.

- *Cold Wallet Storage*: Hold at least 80% of users' assets in cold wallets for security.

- *Insurance or Reserves*: Maintain insurance or reserves to cover potential hacking or network failures.

- *Taxation*: A 20% tax on cryptocurrency profits exceeding 2.5 million won was initially planned but has been delayed until 2028 due to market volatility and infrastructure concerns.

- *ICOs and STOs*: South Korea banned ICOs in 2017 due to fraud concerns but is considering regulated frameworks. STOs are viewed more positively, with regulations being developed to allow them under the Capital Markets Law.

- *Recent Developments*: Both leading presidential candidates, Kim Moon-soo and Lee Jae-myung, support pro-crypto policies, including legalizing spot crypto ETFs and easing investment restrictions. However, they differ on the "one exchange, one bank" rule, with Kim Moon-soo advocating for its abolition to enhance competition ³.