South Korea, one of the key players in the global technology market, is planning a significant change in its cryptocurrency policy. According to the Yonhap agency, the local Financial Services Commission (FSC) is considering lifting the ban on institutional cryptocurrency trading. This is a step that can significantly influence the development of the local cryptocurrency market and open new investment opportunities for financial institutions.
FSC’s new approach – South Korea is focusing on a new opening
The FSC, South Korea’s main financial regulator, announced its intention to gradually allow institutional investors to open trading accounts on cryptocurrency exchanges. The first step is to allow non-profit organizations to trade cryptocurrencies.
So far, under the Act on the Use of Financial Information, cryptocurrency trading was reserved only for retail investors verified by name and surname. While a formal ban on institutions has never existed, the FSC has long recommended that banks refuse to open institutional accounts on cryptocurrency exchanges. Changing the applicable regulations is the fulfillment of one of the election promises of President Yoon Suk-yeol, who seeks to promote the cryptocurrency sector in the country. Yes, this is about the president who tried to impose martial law in South Korea and who will be impeached.
What will the lifting of the ban change?
Making this change could have far-reaching consequences. Firstly, there will be new investment opportunities – opening the cryptocurrency market to financial institutions will increase market liquidity and capitalization. A natural consequence will be an increase in confidence in the cryptocurrency sector, as regulated institutional access can increase the credibility of the digital asset sector in the eyes of retail investors.
It is also worth emphasizing that the FSC announced cooperation with the Digital Assets Committee to develop further regulations, including rules regarding stablecoins, cryptocurrency exchanges and tokenization of assets.
Legal and regulatory context
The proposed changes are part of broader efforts by the South Korean government to create a stable and transparent regulatory environment for cryptocurrencies. In July 2023, the Digital Assets Investor Protection Act entered into force, the second part of which is to focus on stablecoins and exchange rules.
The FSC also plans to amend the Financial Information Act, introducing a system for verifying the main shareholders of digital asset service providers. This is intended to increase transparency and investor protection. Such a restrictive approach to regulation results from two reasons – the first is Do Kwon and the Terraform Labs scandal, and the second is the extremely dangerous criminal activities of the Lazarus Group from North Korea.
The broader global context
South Korea is not the only country focusing on the development of the cryptocurrency sector. Similar steps were taken, among others: in the USA and the European Union, where financial institutions are increasingly involved in trading digital assets, and some banks are increasingly considering establishing BTC as one of their reserves (e.g. the Czech Republic).
If the changes are implemented, South Korea could become one of the leaders in the adoption of cryptocurrencies, combining modern technologies with a transparent and stable regulatory system. This opens new prospects not only for local investors, but also for global market players interested in entering the Asian market.
Will South Korea actually seize the moment and introduce a new crypto law?
The lifting of the ban on institutional cryptocurrency trading in South Korea is a step towards greater acceptance of digital assets in the financial market. Combined with the planned regulations, this may contribute to the further development and professionalization of the cryptocurrency market, while attracting greater investments both from home and abroad. However, given the chaos in the country, it is difficult to say whether the bill will pass in exactly the form planned.
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