South Korea to Ease Institutional Crypto Trading Rules

South Korea is poised to relax restrictions on institutional cryptocurrency trading, signaling a significant shift in policy as the government aims to bolster the nation’s crypto industry.

The Financial Services Commission (FSC) announced plans to grant institutions access to local crypto exchanges in phases, starting with non-profit organizations, according to a Yonhap News Agency report.

For years, South Korea’s banking guidelines have limited institutional involvement in crypto trading, despite the absence of an official ban. Currently, only retail traders, verified through real-name accounts, can participate in the market.

Gradual Expansion of Access

The FSC, in collaboration with its Digital Asset Committee, will implement a phased rollout to enable broader institutional participation.

This initiative builds on the Virtual Asset User Protection Act, introduced last year, which tightened investor safeguards and cracked down on unfair trading practices. Key measures of the act include:

• Requiring exchanges to store user funds in financial institutions.
• Mandating cold wallet reserves.
• Obtaining insurance against potential losses.

The FSC is set to expand the law’s scope further, introducing new regulations for stablecoins, crypto exchanges, and token listings.

Aligning with Global Standards

FSC Secretary-General Kwon Dae-young emphasized the importance of global alignment:

“We need to discuss how to create listing standards, what to do with stablecoins, and how to create rules of conduct for virtual asset exchanges.”

Future plans include revisions to the Special Financial Transactions Act, aimed at improving the eligibility screening of major shareholders in virtual asset companies. The law, which enforces anti-money laundering and financial transparency standards, will also support tighter self-regulation within the crypto industry.

Tackling Speculative Assets and Unlawful Trading

To ensure a safer trading environment, the FSC intends to:

• Tighten screening criteria for speculative assets, including meme coins.
• Introduce forensic tools to combat unlawful trading behaviors.

Legislative Setbacks Amid Political Turmoil

While the FSC’s plans mark progress, South Korea’s crypto reform efforts have faced setbacks due to political turmoil.

In December 2024, the now-impeached President Yoon Suk Yeol declared martial law, pausing key legislative priorities, including:

• Legalization of securities token offerings (STOs).
• Introduction of real-name corporate accounts.

South Korea’s move to relax institutional crypto trading rules highlights its commitment to fostering a regulated yet innovative cryptocurrency environment. Despite political challenges, the reforms underscore the country’s ambition to align with global standards while addressing emerging risks in the digital asset space.