Here’s an updated overview of South Korea’s cryptocurrency policy as of mid‑2025
🔐 1. Regulation & Licensing
• All virtual asset service providers (VASPs)—including exchanges—must register with the Korea Financial Intelligence Unit, under the umbrella of the Financial Services Commission (FSC) .
• Strict KYC/AML regimes are enforced: real-name bank accounts are mandatory, identity verification is required, and large or suspicious transactions are heavily monitored .
• Exchanges must store ≥ 80% of customer crypto assets in cold wallets, keep funds separate, carry insurance or reserves, and keep audit-grade records .
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🛡️ 2. Virtual Asset User Protection Act (VAUPA)
• Enacted July 2024, integrating ~19 crypto laws to enhance user safety .
• Key mandates include:
• Segregated custodial storage for user assets
• Mandatory insurance or reserve funds
• Cold storage requirements and detailed transaction tracking  
• The FSC can inspect, fine, suspend, or revoke licenses for non-compliance .
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💰 3. Taxation
• A 20% capital gains tax on crypto profits over ₩2.5 million (~ $2,000) was initially slated for 2023, postponed to 2025, and then delayed again to 2028 .
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🏛️ 4. Institutional Participation
• A phased roadmap is underway to lift the 2017 ban on institutional crypto trading:
• H1 2025: Non‑profits (charities, universities, law enforcement) may open real‑name accounts and liquidate holdings  .
• H2 2025: Approximately 3,500 listed companies and professional investors will be permitted pilot real‑name trading accounts .
• Banks and exchanges will vet participants, enforce transaction guidelines, and strengthen AML/security oversight .
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🌍 5. Cross‑Border & Stablecoin Regulation
• Starting H2 2025, cross-border virtual asset transactions must be registered and reported monthly to the Bank of Korea, targeting FX-linked crimes (~₩11 trillion since 2020) .
• The FSC is developing a second wave of regulations (expected H2 2025) to address:
• Exchange transparency
• Stablecoin issuance and reserve standards
• Token listings disclosures   .
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📈 6. Crypto ETFs & Other Innovations
• The People Power Party (ruling party) has proposed wider reforms for 2025, such as:
• Eliminating bank-exchange exclusivity
• Authorizing spot crypto ETFs
• Legalizing tokenized STOs, relaxing taxes, and aligning stablecoin rules globally .
• Industry leaders are signaling early steps toward crypto-based ETFs, though formal frameworks are pending .
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🚨 7. Additional Measures & Context
• Exchanges face regular enforcement actions: dozens of foreign platforms have been shut out for violating registration requirements .
• A crypto-crimes task force has been formed to combat money-laundering and illicit activity .
• High-tech infrastructure is being encouraged; notably, Busan is working on a public blockchain city initiative .
• Concerns persist that heavy regulations are pushing homegrown crypto startups abroad (e.g., to Singapore and Dubai) .
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🗓️ Timeline:
Phase Stage Timeline
2017 Institutional ban Enforced
Mar 2021 VASP registration & real-name rules Enforced
Jul 2024 VAUPA enacted Enforced
H1 2025 Non-profit institutional access Planned
H2 2025 Corporate/pro investor pilot Planned
H2 2025 Cross-border reporting Planned
H2 2025 2nd/regulatory wave draft Planned
2028 Full crypto profit taxation begins Planned
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✅ Bottom Line
South Korea combines strict consumer and exchange protections with a cautious path toward institutional involvement and global fintech standards. Heavy regulation continues, but phased liberalization—including corporate access, cross-border oversight, etfs, STOs, and stablecoin frameworks—is scheduled ahead. The largest uncertainties remain tax timing, ETF roll-out, and whether regulations can balance innovation vs. compliance.
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