#SouthKoreaCryptoPolicy

Key Drawbacks of South Korea’s Crypto Policy

1. Market Consolidation & Reduced Competition

• Strict real-name wallet and ISMS‑certification rules forced many smaller exchanges to shut down, leaving just the “Big Four” (Upbit, Bithumb, Korbit, Coinone) to dominate over 90% of KRW volume .

• This consolidation reduces competition, potentially increasing fees and slowing innovation.

2. Stifled Innovation & Regulatory Bottlenecks

• South Korea operates a strict “positive list” approach: crypto-prescribed regulation only allows what’s explicitly permitted. Startups must wait for FSC approval for new activities.

3. Privacy & Surveillance Concerns

• Full KYC means every trade is traceable; there are proposals to track even personal wallet holdings for tax.

4. Tax Uncertainty & Reporting Burden

• Crypto profits are taxed at 20%, but implementation has been delayed multiple times (2023 → 2025 → now maybe 2027).

• This uncertainty discourages serious investment and complicates planning and compliance.

5. High Compliance Costs

• Real-time AML, suspicious activity monitoring, and data integration with financial institutions add heavy operational burdens.

• Small exchanges face a choice: either shut down or hike fees to survive.