Crypto in South Korea faces new rules after political upheaval
South Korea entered 2025 navigating political turmoil, regulatory scrutiny, and a maturing crypto market.
Following the fallout from former President Yoon Suk Yeol’s failed martial law declaration in December 2024, authorities began tightening oversight of the digital asset sector while postponing long-debated tax plans.
As reported by Cointelegraph, throughout the first quarter, lawmakers, regulators, and law enforcement took steps to address market manipulation, corporate participation, and crypto-related crime, even as adoption among retail investors remained high.
Tax delay extends crypto relief to 2027
A proposed 20% capital gains tax on cryptocurrency was pushed back again — this time to 2027. The delay, supported by lawmakers across the aisle, marked the third such postponement and came amid broader economic and political concerns. Legislators cited enforcement challenges, fears of capital flight, and the shifting policy agenda following Yoon’s impeachment.
Warning issued on North Korean-linked hacks
South Korea joined the US and Japan in issuing a warning about state-sponsored cyber threats targeting the crypto sector. The Lazarus Group was named in connection with several major breaches in 2024, including attacks on WazirX in India and South Korea’s Upbit.
Regulatory action builds
The Financial Services Commission (FSC) convened its second Virtual Asset Committee meeting in January but stopped short of fully opening corporate crypto trading. While a decision was in progress, the agency implemented new safeguards against price manipulation and committed to tighter oversight of stablecoins.
That same month, authorities brought the first enforcement under the Virtual Asset User Protection Act. A trader was charged with pump-and-dump violations, while Upbit received a suspension notice for allegedly failing Know Your Customer (KYC) requirements across hundreds of thousands of accounts.
Upbit and Bithumb later agreed to compensate users affected by disruptions during the martial law announcement that had caused service outages and market volatility.
Corporate crypto access begins to take shape
In February, the FSC released a phased rollout plan to allow corporate entities to trade crypto using real-name accounts. The move is expected to begin with charities and universities, which will be permitted to sell donated digital assets later in the year. The plan is part of a broader effort to formalise institutional participation while upholding Anti-Money Laundering (AML) and KYC rules.
Enforcement against crypto crime intensifies
Law enforcement officials rearrested Park, a frequent offender accused of running a fraudulent token scheme involving Artube (ATT) that reportedly made approximately $48 million through market manipulation.
Later in the month, the Financial Intelligence Unit (FIU) issued a partial suspension against Upbit operator Dunamu, citing compliance issues related to KYC and dealings with unregistered foreign platforms. Dunamu has since filed a legal challenge to contest the decision. A court ruling in March allowed the exchange to resume new user onboarding while the case is under review.
Meanwhile, prosecutors officially launched a permanent crypto crime task force following 20 months of operating as a temporary unit. Since mid-2023, the division of prosecutors, regulators, and specialists has recorded more than 70 indictments and the recovery of nearly $500 million in illicit proceeds.
Momentum builds for spot Bitcoin ETFs
South Korea’s financial authorities have begun to review legal pathways for allowing spot Bitcoin exchange-traded funds (ETFs), signalling a possible shift in policy. The review comes amid growing demand from local brokerages and follows the US Securities and Exchange Commission’s approval of similar products.
Unregistered exchanges targeted
In March, regulators compiled a list of unlicensed foreign crypto exchanges and took steps to restrict access, including asking app stores to delist their apps. Google removed 17 apps from its store, and Apple later followed suit. The FIU warned that platforms operating without a license could face legal consequences.
Crypto adoption grows despite lower trading volume
By the end of Q1, crypto account ownership in South Korea exceeded 16 million — more than a third of the population and surpassing the number of domestic stock traders. Despite the growth in users, trading activity fell sharply. Upbit’s quarterly volume dropped by over 30%, according to CoinGecko.
Crypto set to play role in presidential election
With an early presidential election scheduled for June, crypto is expected to remain a high-profile campaign issue. Former prosecutor and current candidate Hong Joon-pyo recently pledged to align South Korean crypto regulations more closely with the US approach. However, his familiarity with digital assets came into question after he acknowledged not knowing what a central bank digital currency (CBDC) is.
(Photo by Unsplash)
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