Cryptocurrency is one of the few areas where South Korea has shown prominence in the global technology industry. However, under the pretext of investor protection, South Korean authorities have effectively stifled the industry’s growth. While South Korean regulators have focused solely on restrictions rather than fostering innovation and economic growth, the nation appears to be losing a vital growth engine. South Korean crypto enterprises are experiencing significant migration to competing jurisdictions such as Dubai and Singapore, leaving behind only a massive consumer market with limited innovation potential.
South Korea stands as a technological powerhouse and a significant player in the global cryptocurrency landscape, driven by widespread Internet access, attractiveness as an investment asset offering higher returns than real estate at lower amounts, and a tech-savvy population. According to Kaiko data, since 2017, South Korea has remained one of the largest markets in the crypto space.2 South Korea’s won (KRW) has consistently been a top-two currency in global fiat volumes. Combining accounts from the country’s top five exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—domestic virtual asset investors total 15.59 million. While this figure includes duplicate counting of individuals with accounts at multiple exchanges, it effectively means one in three South Koreans invest in virtual assets.
The scale of virtual asset investment not only encompasses investor numbers but also overwhelms the South Korean stock market. In November 2024, the daily average trading value at domestic virtual asset exchanges reached KRW 14.9 trillion. This is comparable to the combined amount of KOSPI (9.9214 trillion KRW) and KOSDAQ (KRW 6.9703 trillion) during the same month. It’s common to hear that Upbit, a South Korean cryptocurrency exchange, consistently maintains daily trading volumes around KRW 2 trillion, surpassing the trading volume of Coinbase, the U.S. cryptocurrency exchange.
While South Korean consumers have a significant presence in the global crypto industry, South Korea’s presence as an industry player is minimal. Its restrictive regulatory framework has limited the industry to basic exchange services. Businesses must operate according to current laws, and if operators want to do something not explicitly stated in law, they must obtain permission from the Financial Services Commission (FSC), South Korea’s virtual asset regulatory authority.3 South Korea’s positive regulation system fundamentally mismatches the dynamic nature of the crypto industry. While leading sectors and technologies in crypto evolve weekly, South Korean businesses must wait months or years for explicit regulatory permission to innovate. The virtual asset market’s nature means that leading sectors, or “meta,” change constantly, but updates to “what can be done” are very slow.
Currently, cryptocurrency exchanges are among the meaningful revenue-generating crypto businesses, but even these can only operate within South Korea. Their services require domestic bank accounts and domestically issued phone numbers, making it practically impossible for foreign users to register. The FSC announced in its “2025 Major Business Promotion Plan” on January 8 that it will pursue second-phase virtual asset laws regulating issuance and distribution this year, but as the name suggests, it remains focused on restrictions and maintains the “positive” approach of “don’t do anything unless I say so.”4
On January 15, the Virtual Asset Committee under the FSC discussed stablecoins at its second meeting, but only reached agreement that stablecoins should be handled under a separate regulatory framework rather than comprehensive virtual asset legislation. No bills regarding stablecoins have been introduced in the National Assembly.5
In a press release on February 13, the FSC announced that it will gradually approve the issuance of corporate virtual asset real-name accounts (hereafter referred to as “corporate accounts”) for cashing out, starting in the first half of this year. While this is standard practice overseas, South Korean companies had to wait for the FSC’s decision.6
Now companies are calling for guidelines on stablecoins, exchange-issued tokens, disclosures, and the establishment of a self-regulatory organization. They also seek regulatory updates on foreign exchange rules and taxation to facilitate general corporations’ participation in virtual assets. However, there is no clear timeline for when these changes will happen. Bitcoin spot ETFs, now permitted in the United States, remain a distant prospect in South Korea.
The United States operates under a negative regulatory system wherein everything is essentially permitted unless specifically prohibited by law. This approach creates space for innovation by default—entrepreneurs and businesses can proceed with new ideas unless they encounter explicit legal restrictions. The system is built on the premise that market forces and innovation should be allowed to operate freely, with regulation serving primarily to prevent harm rather than direct activity.
from https:itif.org
