South Korea Tightens Crypto Rules Ahead of Pro-Crypto Presidential Election

The South Korea government is now implementing stricter AML and know-your-customer (KYC) rules for cryptocurrencies. The country, however, is set to loosen the rules for institutions investing in digital assets.

The policy shift comes as South Korea approaches a closely contested presidential election. All major candidates have supported expanding crypto investment options, including legalizing Bitcoin exchange-traded funds (ETFs) and introducing domestic stablecoins.

South Korea’s Financial Services Commission (FSC) ‘s new framework will reinforce safeguards ahead of the expected increase in institutional participation in crypto.

Beginning in June 2025, registered crypto exchanges and certain non-profit organizations can sell crypto assets.

South Korea’s New Guidelines for Non-Profits and Crypto Exchanges

According to the latest filing released by the FSC, the South Korean government will begin allowing designated non-profit organizations and registered digital asset exchanges to sell their crypto holdings from June 2025.

Any crypto received in donations by a non-profit can be sold for cash. Exchanges can turn their user-fee crypto into fiat currency.

Every transaction with institutional clients will go through additional checks for compliance. Exchanges and their partner banks must assess the origin of funds, transaction purposes, and monitor ongoing activity involving institutions and their leadership.

The Korea Federation of Banks and the Digital Asset Exchange Association (DAXA) are expected to distribute formal instructions by the end of May.

South Korea is taking these steps to be in line with global financial standards. The FSC pointed out the role of thorough examination, as it can stop money laundering and fraud.

Expansion of Institutional Access and Market Oversight

The South Korea regulatory agency said publicly listed companies and professional investors would be welcome to join crypto trading. According to the report, this change is expected to happen in the second part of 2025.

Additionally, the expansion will be introduced with further AML requirements and will include mechanisms for monitoring systemic risks tied to institutional involvement.

As part of its series of changes, South Korea is working on the next stage of its crypto regulatory framework. Recent changes ensure that issuing, distributing, trading cryptos, and stablecoins will happen under new, clearer guidelines.

Part of this effort is the Digital Asset Basic Act, which requires stablecoin issuers to hold reserves and register with the FSC.

Over the last year, the South Korean crypto market has seen an increase. According to the FSC, at the end of 2024, more than 9.7 million people in the country were crypto exchange users, which represents about 20% of the population.

During the second half of 2024, $5.26 billion was traded each day on average. Besides, the overall market capitalization domestically jumped to $77.6 billion, up by 91%.

Crypto Becomes a Key Election Issue in South Korea

The upcoming presidential election, scheduled for June 3, has seen crypto emerge as a central policy issue. With over 15 million crypto investors in South Korea, political parties are actively courting digital asset holders.

Both leading candidates—Lee Jae-myung of the Democratic Party and Kim Moon-soo of the People Power Party—have voiced support for legalizing Bitcoin spot ETFs. Such products, currently banned, would enable investors to gain exposure to digital assets via traditional financial exchanges.

This policy direction reflects a broader trend towards integrating crypto into South Korea’s regulated financial ecosystem.

Lee Jae-myung has gone further by proposing the creation of a won-backed stablecoin market. This initiative will reduce capital outflows attributed to reliance on foreign-issued stablecoins such as USDT and USDC. According to FSC data, approximately $40.8 billion in crypto assets left the country between January and March 2025, with nearly half linked to dollar-based stablecoins.

Stablecoin Policy Sparks Debate

Lee’s proposed stablecoin framework is set to be introduced under the forthcoming Digital Asset Basic Act. Domestic stablecoin companies will have to hold a reserve fund of at least 50 billion won and be registered with the FSC under this new rule.

The main aim is to guarantee the financial safety of the country and supervise the issuance of digital currency equivalents.

Even so, some have warned about the possible economic consequences of including stablecoins in South Korea’s financial system. According to critics, allowing private firms to release stablecoins could shift the nation’s monetary structure.

Despite these concerns, the Democratic Party has established a Digital Asset Committee to develop related policies and coordinate with financial regulators. This follows previous efforts by the FSC to improve crypto regulations.

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