South Korean regulators have begun working on the second phase of cryptocurrency regulations to address various regulatory gaps.
Speaking at the second Virtual Asset Committee meeting, the Financial Services Commission’s Vice Chairman Kim So-young stated that the regulator has initiated full-scale discussions regarding the next phase of crypto regulations that will focus on key aspects of the country’s digital asset ecosystem, according to local media reports on January 15.
The first set of crypto rules, defined by the Virtual Asset User Protection Act, was enforced in July 2024.
It focused on safeguarding user deposits, regulating unfair trading practices, and introducing penalties for violations to protect investors.
The second phase of Korea’s crypto regulations
The second phase will target other areas, including guidelines for trading, brokerage, custody, advisory, and evaluation of virtual assets.
For service providers, the regulations will establish entry requirements, operational guidelines, and measures to prevent conflicts of interest.
Mandatory internal control standards will also be introduced to ensure compliance.
Regulators will also focus on stablecoin transactions and related business activities through a separate framework.
During his opening remarks, Kim pointed to regulatory developments across major economies like the European Union, Hong Kong, and Singapore, stressing that South Korea needs to keep up with global trends and clarify virtual asset regulations.
A translated quote from the Vice Chairman reads:
The U.S. is also expected to prioritise clarifying regulatory authorities for virtual assets and establishing stablecoin regulations in the near future. Our government must read the broader global trends and continuously evaluate and improve our current regulatory framework.
The FSC plans to establish task forces and subcommittees involving related agencies to thoroughly review key tasks identified during the Virtual Asset Committee discussions.
A draft is expected to be finalised by the middle of 2025.
No decision on corporate crypto accounts
Another topic discussed during the meeting involved corporate crypto accounts, which remain effectively restricted even though they are not formally banned.
According to Vice Chairman Kim, the issue has undergone extensive review, including discussions in 12 subcommittees and task forces, but a decision has yet to be finalised.
The community has been anticipating a resolution, and earlier reports suggested that regulators would gradually allow it as such accounts could pave the way for corporate investment in digital assets.
However, the matter was not prioritised during previous meetings and regulators focused instead on broader policy issues.
Crypto tax rule delayed
As previously reported by Invezz, South Korea has also delayed the implementation of a crypto tax law that would impose a 20% tax on cryptocurrency gains exceeding 2.5 million won (around $1,800), along with an additional 2% local income tax on applicable profits.
Originally set to come into effect in 2021, the regulation has faced a lot of opposition from industry stakeholders and lawmakers and has now been postponed till 2027.
Nevertheless, the country has witnessed a surge in crypto adoption and investments, especially since incoming President Donald Trump seized victory in the 2024 US elections.
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