- During the first phase of implementation, non-profit organizations such as charities, universities, and law enforcement agencies, will be authorized to open real-name verified accounts on cryptocurrency exchanges
- The second phase will introduce a pilot program allowing approximately a few thousand listed companies and professional investors to access the crypto markets
- Traditional financial institutions are still prohibited from engaging in cryptocurrency-related activities
South Korea’s Financial Services Commission (FSC) has announced plans to gradually lift the ban on institutional cryptocurrency trading, which has been in place for the last 8 years.
This policy shift aims to align with global trends and address the growing domestic demand for blockchain-based financial products.
Turns out, they’re doing this in two stages, split into the first and second half of the year.
In the first half of the year, nonprofits like charities, universities, and law enforcement agencies, will be permitted to open real-name verified accounts on cryptocurrency exchanges. This will enable the said institutions to manage and liquidate crypto donations more effectively.
In the second half, a few thousand listed companies and professional investors gain access to the crypto markets through a pilot program. These entities will be allowed to open real-name accounts for investment and financial purposes, marking a notable shift from the previous restrictions.
Background: The 2017 Ban & Policy Reversal
Speaking of the old ban, in 2017, South Korea put a ban on corporate crypto trading due to concerns over market speculation and potential money laundering.
However, with the global surge in blockchain adoption and the maturation of the crypto industry, the FSC has now decided to rethink its stance.
Related: South Korea Accelerates Crypto Regulations as U.S. Policies Shift
Furthermore, in late 2023, South Korea proposed the Virtual Asset User Protection Act. The new law introduced stronger investor protections, allowing regulators to enforce fair trading practices, prevent fraud, and clear up legal gray areas. This laid the groundwork for safely integrating institutional participation in crypto, with the act coming into effect in mid-2024.
Despite the recent regulatory changes, traditional financial institutions, like banks and brokerages, remain prohibited from engaging in cryptocurrency-related activities. These include buying, selling, and offering crypto-backed ETFs.
Reasons for Lifting the Ban
There are likely a few reasons why FSC decided to do this.
For instance, many South Korean corporations, universities, and charities had already received cryptocurrency donations or held crypto assets but faced legal barriers in liquidating or managing them.
It’s also no secret that South Korea wants to be a global financial hub, but countries like Hong Kong, Singapore, and the UAE have already created favorable environments for crypto businesses (not to mention the US and the EU). Looking at it this way, this move could be South Korea’s way to stay competitive by updating its policies.
Related: South Korea’s Jeju Island Leads Blockchain Tourism Push
In addition, allowing institutional players to enter the crypto space could drive new blockchain projects, investments, and economic growth, boosting the country’s fintech and Web3 ecosystem.
No matter the reason(s), it looks like South Korea is heading toward a more mature and structured crypto market driven by institutional demand, global trends, and new legal frameworks.
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