By 2025, South Korea has become one of the global models for balancing regulation and development in the cryptocurrency market. In the face of continuously growing trading volume and on-chain activity, the South Korean government is reinforcing market transparency, protecting investors, and creating space for Web3 innovation through a series of policies.
1. The virtual asset user protection bill will officially take effect in July 2025
This is South Korea's first systematic legislation targeting the virtual asset market, with main contents including:
Clarify the legal definition of virtual assets
Require exchanges to establish 'user asset custody accounts' and prohibit misappropriation of client assets
Mandatory reporting of significant insider events to combat market manipulation
Criminal penalties set for insider trading, fraud, and money laundering
This bill establishes a legal foundation for South Korea's regulation of the virtual asset market, with the Financial Supervisory Service (FSS) as the main executing agency.
2. Stricter exchange regulation, with licensing becoming core
South Korea adopts a 'licensed operation' system, where only exchanges approved by the government can operate legally. Currently, five platforms, including Upbit, Bithumb, Coinone, and Korbit, have legal qualifications. The entry threshold for new exchanges will be higher in the future, requiring compliance with the following conditions:
Real-name banking cooperation accounts
Information Security Management Certification (ISMS)
Comprehensive Anti-Money Laundering System (AML/KYC)
3. The cryptocurrency tax system will take effect in January 2025
Individuals with virtual asset capital gains exceeding 2.5 million Korean won (approximately $1,800) are required to pay a 20% tax
Will be directly linked to taxpayers' real-name wallets to achieve automatic on-chain reporting
Overseas platforms must also cooperate with South Korean tax authorities, or they will be banned from serving local users
Market trends brought about by policies
Positive impact:
Institutional entry willingness strengthens: Clear regulations, compliant products will usher in policy dividends
User trust increases: Clear custody requirements and market manipulation regulations boost retail investor confidence
Web3 innovation opening: The government is preparing a 'virtual asset innovation sandbox' to support pilot projects in blockchain + AI/finance/entertainment
Potential risks:
Exit tide of small and medium-sized exchanges: High thresholds + regulatory costs may exacerbate industry concentration
Anonymous coins under pressure: Anonymous coins such as ZEC and XMR face delisting waves, with compliance in question
Increased user tax burden: The tax system may lead some investors to migrate to DeFi or cross-border platforms
South Korea's position in the global cryptocurrency landscape
South Korea's average daily trading volume ranks among the top five in the world, making it one of the most active markets globally
Users have a high acceptance of altcoins and meme coins, with HYPE, PENDLE, and other tokens remaining popular in Korea
The South Korean government recently engaged in regulatory information sharing cooperation with Singapore and Japan, intending to lead the formulation of Asian cryptocurrency regulations.
Conclusion
South Korea is accelerating its transition from a 'retail-driven frenzy market' to an 'institutionalized compliance market.' For investors, this is a process of short-term pain and long-term confidence restoration. In the second half of 2025, as the protection bill and tax system are fully implemented, South Korea's cryptocurrency ecosystem will enter a new phase of standardized development.