South Korea Signals Major Crypto Shift With New Regulatory Framework

South Korea, one of the world’s largest cryptocurrency markets, is undergoing significant changes in its regulatory framework.

With sweeping Know Your Customer (KYC) reforms, plans to lift the ban on institutional crypto investments, and legislation on tokenized securities under review, the country is signaling a dramatic policy shift.

Crypto Regulation in South Korea

The South Korean government recently announced enhanced Know Your Customer (KYC) requirements for cryptocurrency exchanges and banks. Previously, South Korea’s Financial Intelligence Unit (FIU) uncovered up to 600,000 potential KYC violations at Upbit exchange.

The latest move aims to prepare for lifting the ban on institutional cryptocurrency investments. According to the Financial Services Commission (FSC), the new regulations will ensure transparency and security while paving the way for institutional investors to enter the market.

Additionally, the South Korean National Assembly is reviewing a bill on tokenized securities. This bill is expected to be passed after the presidential election. It aims to establish a legal framework for the issuance and trading of blockchain-based securities.

If passed, this would mark a significant step in integrating digital assets into the traditional financial system.

Amid these positive regulatory developments, South Korea recently recorded its first transaction of this kind. The nonprofit organization World Vision Korea sold 0.55 ETH on the Upbit exchange.

“World Vision linked its K-Bank corporate account to its Upbit account and successfully sold the Ethereum it received as donations through the Upbit KRW market,” Upbit’s announcement stated.

This move by World Vision Korea enhances liquidity and strengthens investor confidence in the market. By Q3 2025, listed companies and professional investors are expected to be permitted to trade cryptocurrencies, marking a major shift from the seven-year ban in place since 2017.

Furthermore, the FSC is implementing the second phase of the Virtual Asset User Protection Act. This phase focuses on regulating stablecoins and imposing stricter standards on exchanges. These regulations aim to reduce unfair trading practices and protect users’ assets.

According to Bloomberg, South Korea’s cryptocurrency industry is expected to benefit regardless of the outcome of the presidential election. Both major parties, the Democratic Party of Korea (DPK) and the People Power Party (PPP), have expressed support for developing the cryptocurrency market.

The DPK has pledged to promote spot Bitcoin ETFs, while the PPP focuses on establishing a digital asset promotion committee and creating a tax framework.