South Korea's Financial Services Commission has finalized new cryptocurrency regulation guidelines aimed at legitimizing and regulating the crypto markets ahead of institutional investor entry.
Key Aspects of the New Rules
The new regulations, effective June 2025, allow nonprofits and exchanges to operate with virtual assets under strict conditions. Nonprofits must have five years of audited records and establish Donation Review Committees. Exchanges are limited to using proceeds for operating expenses only.
Stricter KYC and AML Procedures
The immediate effect includes enhanced scrutiny for KYC and AML procedures, impacting both banks and exchanges. 'Our new guidelines aim to create a balance between regulatory oversight and the need for flexibility in the rapidly evolving cryptocurrency market,' says Lee Bok-kyung, Chairperson of the FSC.
Impact on Cryptocurrency Market
Only the top 20 cryptocurrencies can be traded, potentially reducing the viability of smaller tokens. Exchanges will be required to disclose sales and use of proceeds. These regulatory changes represent a shift from South Korea's 2017 ban on institutional crypto trading.
The FSC's measures are aimed at increasing market stability and institutional confidence. Historical trends suggest that growing global regulatory frameworks could emerge, influencing South Korea's approach.
