This piece was first published on April 12, 2024, updated on April 16, 2024, October 24, 2024, and June 15, 2026.
Summary
- The largely pro-crypto, Democratic Party of Korea (DPK), and its allies, came to power following polls in 2024, since when crypto regulation, taxation, stablecoin and CBDC development have been firmly on the agenda.
- ETFs and taxation became an election issue, particularly for voters in their 20s and 30s, the demographic most interested in the sector.
- Overall, the authorities maintain a cautious approach to crypto and while keen to support the sector are also intent on protecting the customer and enhancing transparency.
- Read other Crypto in Action articles.
How do South Koreans use crypto?
South Korea was quick to adopt blockchain and cryptocurrencies and the country is regarded as something of a digital currency hotspot, ranking 15th globally for adoption.
South Koreans can own cryptocurrencies and trade on licensed exchanges. They are not considered legal tender or financial assets in their own right. This has not dented their popularity and trading cryptocurrencies powers the sector’s growth in the country. Typically, locals favor high-risk, high-reward crypto investing. There is also great interest in – and fanbases for – esports and blockchain gaming.
Locals prefer altcoins to assets like Bitcoin or Ethereum. The country had its first crypto boom in 2017, and again ahead of Luna and TerraUSD cryptocurrencies’ collapse in May 2022. This event deflated the sector and its prospects but during 2023 a recovery began, and in March 2024, the Korea Premium Index reached its highest level since May 2021.
Domestic Initial Coin Offerings (ICO) are banned in South Korea (although reports in 2025 suggested that the ban was set to be reversed), the asset management market for crypto is small, and cryptocurrency mining activities are limited.
What is the South Korean government’s attitude towards crypto?
The authorities have maintained a cautious stance on crypto, despite South Korea being one of the world’s most active retail trading markets. This, and the country’s high levels of adoption, reveal why crypto became a policy issue during the 2024 elections.
President Lee Jae-myung is pro-crypto, and the current government has largely pursued a pro-innovation approach towards digital assets, and focused on modernizing regulation and interoperability.
The popularity of cryptocurrency trading with initially few legal guardrails created a risky environment. Exemplifying this was the demise of the domestically hugely popular (and homegrown) Luna and TerraUSD cryptocurrencies, which resulted in public outcry.
As a result, the authorities have gradually introduced regulation that addresses problems as they’ve arisen. This is changing in the form of the Digital Asset Basic Act (DABA), which aims to create an overarching framework for the sector. It has, however, suffered delays and has yet to come into effect. Comprising 17 proposals, it is designed to balance the development of blockchain with protection for investors.
The previous prevalence of scams and crypto risks has also given rise to sizeable penalties for offenders. Legislation due to come into effect in July in the form of the Virtual Asset Users Protection Act, imposes prison terms (including life sentences for individuals who accumulate more than 5 billion won ($3.8 million) from illicit crypto schemes) and fines of between three and five times the amount of the illegal profit.
The authorities compel both public figures and companies to disclose their crypto holdings, and exchanges are also heavily monitored. In February 2024, it was reported that the country’s Korea Financial Intelligence Unit (KoFIU) was planning to expel from the marketplace those exchanges that failed to meet forthcoming stringent standards.
What are the key pieces of crypto legislation in place?
The Electronic Financial Transactions Act and Act on Reporting and Use of Specific Financial Information broadly provide the regulatory framework for cryptocurrency and digital assets. The first defines cryptocurrencies as ‘electronic assets’ and provides the rules for their use. This includes anti-money laundering (AML) requirements and know your customer (KYC) checks. The second act requires financial institutions to report suspicious financial transactions, including those related to cryptocurrencies.
Cryptocurrencies are regulated under AML and securities regulations, enforced by the Financial Securities Commission (FSC). In July 2024, the authorities introduced the Virtual Asset User Protection Act, designed to curtail unfair trading practices and safeguard users’ deposits and virtual assets. Additionally, the onus is now on crypto firms to monitor and report suspicious transactions, and regulators have the authority to supervise, inspect and approve virtual asset trading platforms.
By September 2024, 11 asset exchanges had shut down and a further three had temporarily suspended their services, leaving 17.8 billion won ($12.8 million) in investments for customers to claim.
In June 2025, the ruling party introduced the General Act on Digital Assets. This comprehensive framework has been described as a pivotal step in institutionalizing South Korea’s digital assets market. It defines asset types, lays out VASP licensing and conduct requirements, and provides rules for stablecoin issuance, listings, and consumer protection. It is regarded as creating actionable, specific rules for the sector. It was anticipated that at least two years will be needed to develop the relevant regulations and enforcement decrees, with full implementation expected in 2027.
In April 2026, the ruling party unveiled further sector-specific proposals to DABA. The hope is ultimately that the act will expanded on VAUPA’s remit and act as an overarching piece of legislation that creates the broad legal framework for digital assets, including their issuance, trade, custody, and supervision.
The progress of legislation is not, however, without challenges. Disagreements over the issuer of a won stablecoin, as well as key elements like redemption obligation, and restrictions on shareholders’ holdings, have beset DABA, creating delays.
How the crypto sector became an election issue
Crypto found its way onto the agenda for the April 2024 general elections and the presidential polls in 2025, particularly for voters in their 20s and 30s, who are the demographic most interested in the sector. ETFs became one electioneering issue – the then-ruling People Power Party (PPP) made a number of pledges, including investigating allowing Bitcoin ETFs, while the then-opposition Democratic Party said it would allow their purchase. In addition, the PPP said it would establish a digital asset promotion committee and prioritize a regulatory framework with regard to taxation.
On April 10, 2024, the liberal Democratic Party of Korea (DPK) and its smaller allies secured a victory in the parliamentary elections, gaining control of 192 out of 300 seats. The outcome, was interpreted as a referendum on previous President Yoon Suk Yeol’s administration. He and his party, the PPP, struggled with issues like inflation and public dissatisfaction, which were highlighted during the campaign.
The DPK promised reforms, such as the introduction of spot Bitcoin ETFs, which could attract both institutional and retail investors. These policy items reflect the significance of digital assets in South Korean politics, possibly influenced by the increase in crypto investors within the country. As of September 2023, South Korea reported having 6.27 million crypto users, showcasing the political impact of this demographic. Promises related to crypto acted as critical voting incentives in this electoral round, particularly among younger voters who form a substantial part of the crypto community.
Unusually for a presidential election, stablecoins were a key policy issue during the June 2025 campaign. President Lee Jae-myung made institutionalizing a Korean won-denominated stablecoin one of his election pledges, and since coming to office, momentum towards this goal has accelerated.
Stablecoin regulation accelerates
The debate about stablecoins has changed over the years from one focused on systemic risks to recognizing the benefits of a won-backed stablecoin. Currently, there is no regulatory framework solely for stablecoins. Instead, they fall under the VAUPA’s virtual assets category. This means their issuance is prohibited. Furthermore, entities that convert stablecoins into fiat for third parties are treated as VASPs, which means they need to register with the FSC.
This reportedly creates challenges: South Korean VASPS have to obtain real-name bank accounts for clients, which domestic banks are wary of providing. Furthermore, domestic financial institutions are prohibited from holding virtual assets on their balance sheets.
There are three pieces of stablecoin legislation being promoted, each taking a different approach, particularly toward foreign-issued stablecoins.
Under the most restrictive of these, the Digital Asset Basic Act, (DABA), stablecoin issuers must have at least KRW500 million in capital, establish refund reserves, have a credible business plan, and file a detailed registration statement.
In July 2025, lawmaker, Do-geol Ahn sponsored the Issuance and Distribution of Value-Stabilized Digital Assets, which solely focuses on stablecoins. It defines these as digital assets linked to legal tender to preserve stable value. Although more moderate than DABA, it calls for a higher capital requirement of KRW5 billion.
The third act that has been tabled is the Act on Payment Innovation through Stable Digital Assets. The most permissive of the three proposals, it defines stablecoins as assets pegged to legal tender or other stable-value assets issued on distributed ledgers and redeemable on demand. It too would require issuers to maintain a capital requirement of KRW5 billion.
Complicating the situation, negotiations over the DABA stalled in early 2026 over a disagreement between regulators. The BOK has argued that only banks with 51% ownership should be authorized to issue stablecoins, but the FSC has said that this could hamper innovation.
The debate about taxation
With developments in legislation, the authorities have also been looking at taxing the sector. The authorities have been keen to tax the sector since 2022, but such moves have been repeatedly delayed. In 2024, the authorities announced that a rate of 22% would be imposed on crypto asset gains of more than 2.5 million won ($1,703) in January 2027.
Critics argue, however, that there is a lack of both clarity and taxation infrastructure, which makes the authorities’ push for a 2027 deadline, premature.
In May 2026, a public petition against the proposals secured more than 50,000 signatures, which means that the issue has to come before the National Assembly for review. The petition argued that while crypto gains would be taxed, many retail stock and bond gains are exempt. Other elements of uncertainty include a lack of clarity over staking, lending, offshore exchange activity, and decentralized finance income.
South Korea’s work on a CBDC
The Bank of Korea (BOK, central bank) has been researching a CBDC for several years. Like many banks, it has been seeking a compelling use case. In September 2025, it found one in using tokenized deposits for government grant disbursements.
Project Han River is a tokenized deposit and wholesale CBDC initiative. Its first phase ran from October 2023 to June 2025, during which time approximately 81,000 electronic wallets were opened and 114,880 transactions processed.
It looked as if the second phase might be derailed when several of the nine participating banks complained about the cost of the trials, but ultimately their participation continued.
Phase two of the project began in March 2026, and in April, the BOK’s new governor, Shin Hyun-song, announced during his inaugural speech that one of his four priorities would be promoting and supporting CBDCs and tokenized deposits. This is in line with the authorities’ desire to internationalize the fiat, won, and innovate the country’s currency regime.
Raising funds and allocating money
The authorities banned initial coin offerings (ICOs) in 2017, but in 2025, reports emerged suggesting that new legislation would reverse this. The original ban came as a reaction to fraud and investor protection concerns during a period when South Korea’s crypto market was developing quickly. It saw domestic blockchain projects launch token sales overseas before seeking listing on South Korean exchanges. In turn, this created risks for domestic users, who found themselves trading assets without the safeguards that might be available if it had been a domestic offering.
DABA aims to correct this by introducing strict disclosure rules, and through the creation of a controlled, transparent environment for raising funds within South Korea.
In 2026, the authorities also ended a nine-year ban on corporate crypto investment. Eligible entities will be permitted to invest up to 5% of equity capital in the top 20 cryptocurrencies (by market capitalization). The limit has been set at 5% to ensure both a meaningful level of exposure and, at the same time, a conservative risk profile.
The policy is also expected to create options for treasury diversification and returns, as well as support domestic crypto exchanges by boosting liquidity and the depth of the market.
Timeline of crypto regulation and action
2013
South Korea launched Korbit, its first crypto exchange.
2014
Xcoin (later rebranded as Bithumb) launched, growing to become one of the country’s most prominent crypto exchanges.
2017
In September, the authorities banned domestic ICOs to curtail retail speculation and protect consumers.
2018
The government sought to regulate cryptocurrency trading. Trading was allowed only from real-name bank accounts.
In February, then-head of the FSS, Choe Heung-sik announced the government’s support for cryptocurrency trading and pressed financial institutions to facilitate transactions with exchanges.
In March, an amendment was made to the Act on Report and Use of Specific Financial Transaction Information (which came into effect in March 2021), requiring all South Korean virtual asset service providers to tighten up regulations on bank accounts, including expanding AML and KYC provisions.
2021
The Special Financial Transactions Act (Act on Reporting and Using Specified Financial Transaction Information) came into effect, enforcing AML and CFT compliance. As a result, VASPs became required to register with the Korea Financial Intelligence Unit (KoFIU).
2022
In April, the FSC announced guidelines for new securities business – the Fractional Investment Guideline.
In May, the authorities unveiled plans to regulate ‘security-type tokens’, based on the Financial Investment Services and Capital Markets Act (FSCMA). This was part of the Digital Asset Framework Act, which aims to regulate virtual/digital asset-related issues.
The same month, domestic cryptocurrencies Terra and Luna collapsed, prompting heavy regulatory scrutiny.
In August, the government created a joint public-private taskforce with the aim of developing a more robust, regulatory framework. This resulted in essential measures being enacted in April 2023, followed by comprehensive legislation for virtual asset users in June 2023.
2023
In February, the FSC released a plan designed to improve regulations related to issuing and distributing token securities.
In June, the National Assembly passed the first part of the Virtual Asset User Protection Act. This is designed to regulate the market primarily for the benefit of better protecting consumers and investors. It marked the first local law designed solely to regulate virtual asset services and allows the authorities to act against virtual asset business operators.
In July, an interagency investigation agency – the Joint Investigation Centre for Crypto Crimes – was launched.
In August, the Electronic Financial Transactions Act (EFTA Amendment), was passed, expanding the registration scope of prepaid service providers.
In October, the FSS announced that it was preparing regulation to supplement the Virtual Asset Users Protection Act to strengthen its regulatory framework ahead of it going into effect in July 2024.
The same month, the authorities unveiled a CBDC pilot test plan, creating a network to enable financial institutions to issue digital currencies.
In December, the FSC proposed rules to protect users of crypto exchanges. Exchanges would be required to store at least 80% of their customers’ deposits in cold wallets, and would have to pay fees to customers for using their deposits.
2024
In January, the FSC proposed banning credit card use to buy cryptocurrency, arguing it was seeking to stop the illicit outflow of domestic funds overseas.
In July, the authorities enacted the Virtual Asset User Protection Act, which introduced strict practices in an attempt to prevent unfair trading practices.
In late 2024, the government delayed its 22% crypto capital gains tax until January 2027. Taxation on crypto was due to come into effect in 2022, but has been repeatedly delayed.
2025
In January, the FSC’s Virtual Asset Committed announced the second phase of its legislative agenda for virtual assets, with a focus on stablecoins.
In June, the ruling Democratic Party of Korea introduced the General Act on Digital Assets to parliament.
The following month, representative Do-geol Ahn sponsored the Issuance and Distribution of Value-Stabilised Digital Assets (the Value-Stabilised Assets Act).
Also in July, parliamentary representative Eun-hye Kim introduced the Act on Payment Innovation through Stable Digital Assets (the Payment Innovation Act).
In November, the FSC announced it would expand the travel rule to cover all virtual asset transactions.
At the year’s end, Do Kwon, the crypto entrepreneur behind Luna and Terra was sentenced to a 15-year prison term. The judge described his handling of the cryptocurrencies’ collapse as “epic fraud.”
2026
In January, the FSC proposed a crypto exchange ownership cap, citing governance risks tied to concentrated shareholding, a proposal that prompted strong opposition from the Digital Asset Exchange Alliance, which represents South Korea’s five largest exchanges.
The FSC finalized guidelines allowing listed corporations and professional investors to allocate up to 5% of equity capital to top 20 crypto assets.
In March, the second phase of Project Han River, the BOK’s CBDC initiative, began.
The FSC and Democratic Party agreed to limit major shareholder stakes in domestic crypto exchanges to 20%.
In April, the FSC and FSS ordered domestic crypto exchanges to use a single system for delaying withdrawals in a move designed to counter phishing.
Outlook: Government and crypto industry need to work together
The collapse of the Luna and TerraUSD cryptocurrencies had an undeniably large impact on South Korea’s crypto investors. The authorities have subsequently worked hard to make the sector and its dealings as transparent as possible, and protect consumer and investor interests.
There are indications that the country is seeking to become a regional leader in adopting and regulating cryptocurrencies, and the fact that crypto has featured as an election pledge, is testament to the authorities’ seriousness.
South Korea does, however, face stiff competition. Singapore has assumed the position of digital assets hub and is cementing this through legislation as well as in areas like education. Other regional players, like Thailand, are also vying to achieve a hub-like status, so this places the emphasis on South Korea’s legislators and regulators to create a welcoming but safe environment that promotes innovation.
In this respect it needs to look at the sector holistically, and boost investment into areas like digital assets education, and pursue more of a regional role on digital matters. But it’s not just the government that has to work to create the regulation and a favorable environment for the continued growth and development of the sector. Digital asset players also need to participate in supporting and promoting the industry.
