Crypto in South Korea faces new rules after political upheaval
South Korea Grapples with Crypto Challenges and Opportunities Amid Political Upheaval in 2025
As 2025 unfolds, South Korea finds itself at a pivotal crossroads, navigating a complex landscape marked by political instability, evolving crypto regulations, and a maturing digital asset market.
The collapse of former President Yoon Suk Yeol’s administration in December 2024, following his controversial and ultimately failed martial law declaration, has had lasting repercussions across the nation. In the aftermath, South Korean authorities have intensified regulatory scrutiny of the cryptocurrency sector while simultaneously delaying long-anticipated tax reforms.
According to reports from Cointelegraph and various local media outlets, the first quarter of 2025 has been characterized by sweeping moves from lawmakers, regulators, and law enforcement. Their actions reflect a growing determination to address market manipulation, corporate participation, and crypto-related crimes. Despite these challenges, retail adoption of digital assets remains robust, underscoring the resilience of South Korea's crypto community.
Crypto Tax Plans Pushed Back to 2027
One of the most notable policy shifts has been the repeated postponement of the 20% capital gains tax on cryptocurrency transactions. Initially scheduled for implementation in 2022 and later pushed to 2025, the controversial measure has now been deferred to 2027. Lawmakers from both major political parties supported the latest delay, citing concerns over enforcement mechanisms, the potential for capital flight, and the necessity to refocus governmental priorities following Yoon's impeachment.
The delay offers temporary relief to crypto investors and startups alike, providing breathing space for the sector to continue its rapid growth. Nevertheless, the postponement has drawn criticism from some quarters, who argue that South Korea risks falling behind global peers in establishing a clear and stable regulatory framework.
Rising Threats from North Korean Cyber Attacks
Security concerns have also come to the fore. In early 2025, South Korea, in coordination with the United States and Japan, issued a stark warning regarding state-sponsored cyber threats. Authorities pointed to the notorious Lazarus Group, linking it to several high-profile cyberattacks in 2024, including breaches of India's WazirX and South Korea’s own Upbit exchange.
The joint advisory emphasized the urgent need for crypto platforms to bolster their cybersecurity defenses. Experts suggest that as cryptocurrencies become increasingly integrated into global financial systems, they present lucrative targets for state and non-state actors alike.
Strengthening Regulatory Oversight
The Financial Services Commission (FSC), South Korea’s top financial watchdog, convened its second Virtual Asset Committee meeting in January. While the meeting stopped short of fully liberalizing corporate access to crypto trading, it led to the introduction of new safeguards against price manipulation and an expressed commitment to enhance the oversight of stablecoin operations.
In a landmark enforcement action, authorities invoked the newly enacted Virtual Asset User Protection Act for the first time. One trader faced charges related to pump-and-dump schemes, while Upbit received a suspension notice after allegedly failing to meet Know Your Customer (KYC) obligations across hundreds of thousands of user accounts.
In response to outages and market volatility triggered by the martial law announcement in late 2024, major exchanges Upbit and Bithumb have agreed to compensate affected users. This move reflects growing pressure on platforms to prioritize consumer protection amid heightened regulatory expectations.
Steps Toward Corporate Crypto Integration
Recognizing the inevitable convergence between traditional finance and digital assets, the FSC unveiled a phased plan in February to allow corporate entities limited access to crypto trading. The initial phase will enable universities and charitable organizations to sell donated digital assets using real-name accounts.
The broader goal is to formalize institutional participation in the crypto market while maintaining rigorous Anti-Money Laundering (AML) and KYC compliance. Analysts believe this could pave the way for greater legitimacy and increased institutional investment in the South Korean crypto ecosystem.
Crackdown on Crypto Crime Intensifies
Law enforcement agencies have continued to make headlines by intensifying their crackdown on illicit activities in the digital asset space. Notably, authorities rearrested a figure known as Park, accused of orchestrating a fraudulent token scheme involving Artube (ATT) that allegedly amassed around $48 million through market manipulation.
The Financial Intelligence Unit (FIU) also moved to suspend partial operations of Dunamu, the parent company of Upbit, citing breaches related to KYC compliance and interactions with unregistered foreign platforms. Dunamu has contested the suspension in court, and a March ruling allowed the exchange to resume onboarding new users while the case remains under judicial review.
Meanwhile, the launch of a permanent crypto crime task force marked another milestone. The unit, composed of prosecutors, regulators, and industry experts, transitioned from a temporary task force to a standing division. Since mid-2023, it has secured over 70 indictments and recovered nearly $500 million in illicit gains, underlining the government's commitment to maintaining the integrity of its burgeoning digital economy.
Growing Momentum for Bitcoin ETFs
South Korean regulators have also started to explore the possibility of approving spot Bitcoin exchange-traded funds (ETFs), mirroring recent developments in the United States. The review process signals a potential policy shift and could satisfy growing demand among domestic brokerages and institutional investors.
The introduction of spot Bitcoin ETFs could dramatically enhance mainstream access to crypto investments, offering regulated, easy-to-trade options for both retail and professional investors. However, regulators remain cautious, mindful of the volatility and risks historically associated with cryptocurrency markets.
Unregistered Exchanges in the Crosshairs
Authorities have turned their attention to unlicensed foreign crypto exchanges operating within South Korea's borders. In March, regulators compiled a comprehensive list of these platforms and worked with technology companies to restrict access.
As part of the initiative, Google delisted 17 related applications from its app store, with Apple later following suit. The FIU has warned that any platform operating without proper registration would face serious legal consequences, reinforcing the government's tough stance on compliance.
User Base Expands Amid Declining Trading Volume
Despite intensified regulatory scrutiny and declining trading volumes, cryptocurrency ownership in South Korea continues to grow. By the end of the first quarter, more than 16 million South Koreans held crypto accounts, representing over a third of the national population.
However, trading volumes told a different story. According to CoinGecko, Upbit’s quarterly trading volume declined by more than 30%, reflecting broader market trends as investor caution grows in response to global economic uncertainties.
Crypto's Rising Role in Political Discourse
As South Korea heads towards a snap presidential election scheduled for June, cryptocurrency is set to play an increasingly prominent role in political debates. Leading candidate Hong Joon-pyo, a former prosecutor, has pledged to harmonize South Korea's crypto regulations with those of the United States, seeking to foster innovation while ensuring robust oversight.
Yet, questions remain regarding the depth of political leaders' understanding of digital finance. Hong faced criticism after admitting he was unfamiliar with basic concepts such as central bank digital currencies (CBDCs), raising doubts about the preparedness of policymakers to steer the nation through the next phase of crypto evolution.
Looking Ahead
As South Korea negotiates the challenges and opportunities presented by digital assets in 2025, it faces a delicate balancing act. The government must foster innovation while ensuring market stability, protect consumers without stifling growth, and guard against cyber threats without isolating the nation from global crypto developments.
How the country navigates these complexities will not only shape its own future in the digital economy but could also serve as a bellwether for emerging markets around the world grappling with similar issues. South Korea’s next moves in the crypto arena are poised to have implications far beyond its borders, influencing global regulatory standards and investment trends for years to come.
Source: lockchaintechnology-news.com
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