South Korea Unveils Plans to Ease Institutional Crypto Trading Rules

In a significant policy shift, South Korea is preparing to relax its restrictions on institutional cryptocurrency trading, signaling strong support for the nation’s crypto sector. The Financial Services Commission (FSC) has outlined a phased approach, initially granting access to non-profit organizations.

For years, institutional participation in crypto trading was limited by banking guidelines, despite no official ban being in place. At present, only verified retail traders with real-name accounts can engage in the crypto market. However, the FSC is collaborating with its Digital Asset Committee to gradually introduce institutional access, potentially increasing the sector’s market participation.

This move builds on the Virtual Asset User Protection Act, which was passed last year to enhance investor protection and curb unfair trading practices. Among its provisions are requirements for exchanges to store user funds securely in financial institutions, maintain cold wallet reserves, and secure insurance against potential losses.

The FSC is also planning to expand the Act’s provisions to cover new regulations for stablecoins, crypto exchanges, and token listings. FSC Secretary-General Kwon Dae-young emphasized the need to create standards for token listings, establish rules for stablecoins, and develop guidelines for exchanges. The goal is to align South Korea’s regulatory framework with global standards in the crypto space.

Looking ahead, the FSC is preparing to review major shareholders’ eligibility in virtual asset companies through updates to the Special Financial Transactions Act, which is the country’s main tool for enforcing anti-money laundering and financial transparency.

Moreover, the FSC intends to tighten self-regulation in the crypto industry by focusing on speculative assets, such as meme coins, and will introduce new forensic tools to combat illegal trading practices, contributing to a safer trading environment.

Despite these forward-looking measures, South Korea’s crypto reforms have been hampered by political instability. In December 2024, former President Yoon Suk Yeol declared martial law amid escalating tensions, temporarily stalling key legislative actions, including the legalization of securities token offerings (STOs) and the introduction of real-name corporate accounts.