In a landmark move that signals a new chapter in the global digital asset economy, South Korea is set to lift its long-standing institutional ban on cryptocurrency investments starting June 2025. This decision, announced by the country’s Financial Services Commission (FSC), will allow nonprofit organizations, crypto exchanges, and other institutional entities to engage in the trading and sale of digital assets under a regulated framework.
The policy shift is expected to reinvigorate the South Korean cryptocurrency landscape, which has remained one of the most active and technically advanced markets globally. The lifting of the ban, however, is accompanied by a stringent Know Your Customer (KYC) regime to enhance transparency, ensure accountability, and prevent the misuse of funds in the crypto ecosystem.
Background: South Korea’s Regulatory Stance on Crypto
South Korea has historically maintained a cautious but evolving stance toward cryptocurrency markets. In 2018, the government imposed restrictions on institutional investments in crypto assets, citing concerns over financial instability, fraud, and lack of transparency. These restrictions barred institutional players such as nonprofit foundations, asset managers, and crypto exchanges from directly holding or transacting in digital assets.
Despite the restrictions, South Korea remained one of the most crypto-active countries in Asia, with a large and sophisticated retail investor base. However, institutional involvement remained muted due to regulatory constraints.
With increasing global acceptance of crypto assets and the evolution of robust digital infrastructure, South Korea has gradually warmed up to the idea of regulated institutional participation in this space.
The Announcement: What Changes from June 2025?
Beginning in June 2025, nonprofit institutions and registered crypto exchanges will be allowed to sell and trade digital assets, provided they comply with the newly established regulatory framework.
Key highlights of the revised policy include:
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Permission for Institutions to Trade Crypto: Institutions such as nonprofit foundations and exchanges will now be allowed to sell digital assets, either from their holdings or as part of their operational portfolios.
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Mandatory Enhanced KYC Protocols: The Financial Services Commission has made it compulsory for all institutional participants to follow enhanced KYC checks. This includes detailed verification of the purpose of transactions, origin of funds, and the identities of counterparties.
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Licensing and Registration: Entities looking to participate in crypto transactions must first obtain necessary licenses from relevant regulatory bodies, including the FSC and the Korea Financial Intelligence Unit (KoFIU).
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Stronger AML Safeguards: In addition to KYC, institutions are required to establish anti-money laundering (AML) systems and comply with reporting obligations for suspicious transactions.
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Transaction Reporting Requirements: Institutions will be required to maintain records of all crypto-related transactions, including wallet addresses, transaction values, and identity documents of all parties involved.
Why the Policy Shift Now?
There are multiple reasons driving South Korea’s decision to allow institutional crypto investments:
1. Global Crypto Adoption
With financial centers like the United States, Singapore, Hong Kong, and the European Union increasingly integrating crypto into mainstream finance, South Korea is keen to remain competitive and attractive to fintech innovation and capital flows.
2. Boost to Economic Innovation
The move is expected to drive innovation in blockchain technology and fintech applications. Enabling institutional players to actively participate in crypto markets will accelerate the development of financial products, such as tokenized assets, digital bond issuance, and crypto-based lending.
3. Stronger Market Oversight
By lifting the ban and simultaneously introducing strict regulatory controls, the government aims to strike a balance between innovation and oversight. Instead of banning activity, the authorities prefer to channel it through a supervised and traceable framework.
4. Pressure from Domestic Institutions
Many local entities, including nonprofit institutions and crypto exchanges, have lobbied for access to crypto markets in a regulated manner. The FSC’s new rules represent a measured response to industry demands for inclusion.
New KYC Requirements: A Closer Look
The cornerstone of the new policy is the reinforced KYC (Know Your Customer) mandate, designed to prevent financial crimes and protect market integrity.
Key KYC Components Include:
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Purpose of Transaction Declaration: Institutions must declare the specific intent behind every digital asset transaction. For instance, whether the transaction is for investment, donation, conversion, or payment.
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Source of Funds Verification: Institutions must provide detailed documentation proving the legal origin of funds used in transactions.
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Real-Name Identification: All participants in institutional crypto transactions must undergo real-name verification, linked with their corporate or organizational identity.
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Enhanced Due Diligence (EDD): For high-risk transactions or dealings with foreign entities, additional scrutiny and due diligence measures are mandatory.
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Regular Compliance Audits: Regulatory bodies will conduct scheduled audits of institutional entities to verify compliance with KYC and AML protocols.
Expected Impact on South Korea’s Crypto Market
1. Institutional Participation Will Expand
With regulatory clarity, more institutional players—ranging from charitable organizations to blockchain startups—are expected to enter the crypto space. This will not only deepen liquidity but also improve the maturity of the market.
2. Market Transparency Will Improve
The new KYC and AML framework is likely to significantly reduce fraud, wash trading, and tax evasion, making the South Korean crypto market more transparent and trustworthy.
3. Innovation in Financial Products
Licensed institutions could begin offering structured financial products such as crypto ETFs, tokenized equity products, and blockchain-based payment services. This could spur a new wave of fintech growth in the country.
4. Retail Investor Confidence
As institutions enter the market with transparent frameworks, retail investors may also feel more confident participating in the ecosystem, backed by the belief that the system is now more secure and accountable.
Global Comparisons: Where South Korea Stands
South Korea’s new policy aligns with a global trend of bringing cryptocurrencies under formal regulation. While countries like the U.S. and the EU have developed comprehensive regulatory regimes such as MiCA (Markets in Crypto-Assets) and SEC-based classification frameworks, South Korea’s model focuses on transaction integrity and participant legitimacy.
By balancing access and scrutiny, the country aims to encourage lawful innovation while mitigating the systemic risks associated with unregulated crypto activities.
Challenges and Criticisms
While the decision has largely been welcomed, there are some concerns:
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Compliance Burden: Smaller institutions and startups may find the cost of compliance with strict KYC and AML protocols to be high.
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Limited Initial Scope: The policy currently applies only to nonprofit institutions and exchanges. Broader institutional access—such as banks and asset managers—remains restricted, at least for now.
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Potential for Overregulation: Some experts warn that too much control could hinder innovation and deter investment in emerging crypto ventures.
What Lies Ahead
The FSC has indicated that it will review the success of this policy over a six-month period before potentially extending it to more institutional categories, including hedge funds, banks, and insurance companies. Feedback from market participants, combined with compliance performance, will determine the next phase of expansion.
Furthermore, there are expectations that South Korea may soon introduce a central bank digital currency (CBDC) framework, which would integrate seamlessly into a regulated digital asset ecosystem.
Final Thoughts
South Korea’s decision to lift the institutional ban on crypto investments starting June 2025 is a landmark policy change. It reflects a mature regulatory approach that recognizes the need for innovation while maintaining financial integrity and transparency.
With new KYC and AML rules in place, the move is expected to bring institutional credibility, improve compliance, and lay the foundation for the next stage of crypto market development in South Korea. As the country repositions itself as a crypto-friendly economy under strict oversight, the coming months will be critical in shaping its long-term digital finance future.
The world will be watching how South Korea balances freedom and responsibility in this newly regulated crypto frontier.
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