South Korea is turning up the heat on cryptocurrency regulations as it opens its doors to institutional investors. On May 20, the Financial Services Commission (FSC) unveiled a comprehensive set of new rules aimed at strengthening the framework around digital asset transactions. These measures, set to roll out in June, are poised to shake up the crypto landscape by imposing rigorous compliance standards on nonprofit entities and virtual asset exchanges.
A New Era for Nonprofits and Exchanges
The FSC’s guidelines are clear: nonprofit organizations wanting to engage in crypto sales must now meet stringent criteria. They need a solid track record of at least five years of audited financials to even consider receiving and selling virtual asset donations. And that’s not all. Each organization will also be required to form an internal Donation Review Committee to meticulously evaluate the suitability of donations and determine liquidation strategies.
Here’s the catch—donations won’t just be accepted freely. In a bid to curb money laundering, all donations must flow through verified Korean won exchange accounts. Banks, exchanges, and the nonprofits themselves will shoulder the responsibility of verification. Only cryptocurrencies listed on at least three major domestic exchanges qualify for these transactions, with immediate liquidation expected upon receipt.
Crypto exchanges, on the other hand, are being drawn into a tighter regulatory net. While they can liquidate user fees paid in crypto, this is strictly to cover operational costs, and the sales are capped at daily limits—no more than 10% of the total planned amount. The top 20 tokens by market cap across five won-based exchanges are the only ones eligible for these sales, effectively narrowing the playing field. For a deeper dive into the regulatory implications, see our coverage of the SEC’s latest guidance.
The End of the Road for Zombie Tokens?
Standards for listing digital assets are tightening as well. The FSC aims to stabilize the market by demanding a minimum circulating supply before any token can trade. Post-listing, market orders will face temporary restrictions to prevent wild price fluctuations. Those meme coins and so-called zombie tokens—marked by low volume and thin market caps—are under the microscope. If they can’t meet liquidity benchmarks or fail to engage their community, exchanges will have no choice but to delist them.
Beginning in June, both exchanges and nonprofits can apply for real-name accounts to facilitate these sales. The FSC plans to extend real-name accounts to listed firms and professional investors later this year, signaling a more inclusive market environment.
Political Winds Favor Crypto
On the political front, South Korea’s crypto landscape is abuzz with activity. Lee Jae-myung, leader of the Democratic Party, is pushing for the creation of a stablecoin pegged to the Korean won. His proposal, unveiled during a recent policy forum, aims to prevent capital flight while enhancing the country’s financial independence. The stablecoin could potentially mitigate reliance on foreign-backed digital currencies like USDt and USDC, Lee argues.
Meanwhile, Kim Moon-soo of the ruling People Power Party isn’t sitting idle. He, too, supports the introduction of spot crypto exchange-traded funds (ETFs), echoing Lee’s sentiment and hinting at bipartisan support for digital asset reforms. As the Bitcoin ETF debate continues to gain traction globally, South Korea’s political heavyweights are setting the stage for potential legislative changes. This mirrors the ongoing discussions in the U.S., as detailed in our analysis of Congress’s upcoming crypto legislation debates.
Looking Ahead
As these sweeping measures prepare to take effect, the South Korean crypto market stands on the brink of significant transformation. These regulatory enhancements could very well position the country as a trailblazer in the institutional crypto space. However, questions linger about the long-term impact on innovation and market dynamism. Will these rules stifle the very creativity that has driven the crypto boom, or will they cultivate a more secure and mature market? Only time will tell as South Korea embarks on this new chapter.
Source
This article is based on: South Korea tightens crypto rules ahead of institutional market entry
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
