South Korea’s crypto market poised for change with new institutional guidelines

South Korea is reportedly preparing to relax its restrictions on crypto trading for institutional investors, signaling a significant shift in the country’s approach to digital asset regulation.

Local media outlet Yonhap reported on Jan. 8 that the country’s Financial Services Commission (FSC) will introduce phased regulatory changes to enable institutions to participate in crypto trading.

Currently, South Korea’s regulations limit crypto trading to verified retail investors. Although institutional investors are not outrightly banned, banks are restricted from opening crypto trading accounts for them. This exclusion has long hindered their participation in the digital asset market.

However, the FSC plans to collaborate with the Digital Asset Committee to initiate these reforms, with non-profit organizations likely to be the first allowed access. This move marks a shift in the government’s approach to institutional involvement in crypto markets.

In addition, the FSC is preparing to roll out the second phase of its Virtual Asset User Protection Act. This phase will establish new guidelines on crypto listing standards, stablecoins, and operational conduct for virtual asset exchanges.

According to FSC Director Kwon Dae-young, the updated framework will align South Korea with global regulations in the digital asset sector. He said:

“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. We will work to align with global regulations in the virtual asset market.”

The FSC also intends to revise the Special Financial Transactions Act as part of these efforts. The changes will introduce a review system to assess the eligibility of crypto exchange shareholders, incorporating social credit evaluations as part of the process.

Advancing crypto

The FSC’s actions align with broader efforts to develop South Korea’s crypto industry further.

Among the key initiatives is the push to launch spot-based crypto exchange-traded funds (ETFs). Despite gaining traction in other countries, these funds have yet to receive regulatory approval in South Korea.

Eun-Bo Jeong, Chairman of South Korea’s Exchange, recently advocated for the introduction of crypto ETFs. He argued that these innovative products could address the nation’s need for dynamic financial instruments to boost its capital markets.