South Korea is poised to significantly relax its restrictions on institutional crypto trading. The Financial Services Commission (FSC) plans to gradually grant institutions, starting with non-profit organizations, access to local crypto exchanges.
This move marks a significant policy shift for the country, which has historically limited institutional participation in the crypto market. While no official ban existed, banking guidelines effectively restricted institutional trading, confining crypto trading to retail investors.
The FSC's decision builds upon the Virtual Asset User Protection Act, enacted last year to enhance investor safeguards and combat unfair trading practices. This law introduced stringent measures, including mandatory user fund storage in financial institutions, cold wallet reserves, and insurance requirements for exchanges.
The FSC now plans to expand the scope of this legislation, introducing new regulations for stablecoins, crypto exchanges, and token listings. "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," stated FSC Secretary-General Kwon Dae-young. "We will work to align with global regulations in the virtual asset market."
Furthermore, the FSC aims to strengthen self-regulation within the crypto industry. This includes tightening screening criteria for speculative assets like meme coins and introducing forensic tools to investigate and combat unlawful trading activities.
The FSC also plans to introduce a system to review the eligibility of major shareholders in virtual asset companies through revisions to the Special Financial Transactions Act, a crucial step in enhancing anti-money laundering and financial transparency standards.
Challenges and Setbacks
Despite these positive developments, South Korea's crypto reforms have faced significant setbacks due to recent political turmoil. The declaration of martial law by the now-impeached President Yoon Suk Yeol in December 2024 temporarily halted legislative priorities, including the much-anticipated legalization of securities token offerings (STOs) and the introduction of real-name corporate accounts.
Looking Ahead
The gradual easing of restrictions on institutional crypto trading represents a significant step forward for South Korea's crypto sector. By fostering a more inclusive and regulated environment, the country aims to attract institutional investment and further develop its position in the global crypto market.
January 2025, Cryptoniteuae