South Korea mandates stricter crypto AML, KYC for upcoming institutional ban lift

South Korea is requiring local crypto exchanges and banks to strengthen their know-your-customer measures for new institutional clients as the country gradually lifts its ban on institutional investment in crypto.

Starting in June, certain non-profit organizations and registered crypto exchanges will be allowed to sell their crypto in South Korea. Non-profits may sell crypto they received through donations, while exchanges can liquidate user fees paid in crypto.

In a Tuesday press release , the Financial Services Commission (FSC), the country's top financial regulator, said crypto exchanges and their partner banks must verify and examine the source of funds and purpose of transactions for new institutional clients "in detail."

Stricter KYC measures are meant to protect the local crypto and financial market from money laundering risks, the FSC noted. In line with this goal, the regulator stipulated that institutions and their CEOs must be monitored for potential money laundering-related activities.

The Korea Federation of Banks and Digital Asset Exchange Association (DAXA) is expected to distribute such instructions to exchanges and banks later this month.

The FSC added that the government plans to announce measures to allow publicly listed companies and entities listed as professional investors to trade on crypto exchanges within the second half of 2025, with additional anti-money laundering mandates.

1-in-5 trades crypto

South Korea is home to one of the largest spot crypto markets in the world, with local retail investors known for their heavy focus on altcoins. 

As of the end of last year, South Korea had 9.7 million crypto exchange users, which is nearly 20% of its total population, according to the latest data from the FSC.

In the second half of 2024, South Korea recorded a daily average crypto trading volume of $5.26 billion, with the total local crypto market cap growing 91% during the period to $77.6 billion, the data showed.

Crypto has taken center stage in the country's upcoming presidential election in June, with the two leading candidates aligned in their support for reversing the ban on spot crypto exchange-traded funds.