South Korea to Allow Institutional Cryptocurrency Trading
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The South Korean financial regulatory body, **Financial Services Commission (FSC)**, plans to gradually lift the ban on institutional cryptocurrency trading, expected to be implemented sometime this year. This decision marks a modernization of South Korea's cryptocurrency industry and opens the door for institutional investors. Previously, cryptocurrency trading in South Korea was limited to verified retail investor accounts, prohibiting the participation of institutional investors.
Main Background and Motivation
This move is based on the **Virtual Asset User Protection Act**, enacted in July 2024, which introduces measures such as mandatory cold wallet reserves for exchanges, ensuring user funds are stored within financial institutions, and purchasing insurance to guard against potential losses. The aim is to protect investors and enhance market transparency and security. This law provides a framework for compliance for cryptocurrency exchanges and markets, laying the groundwork for further opening up South Korea's crypto market in the future.
Policy Changes
Allowing Institutions to Access Crypto Exchanges: The Financial Services Commission (FSC) plans to first allow non-profit organizations to access local cryptocurrency exchanges. This means that institutional investors will have the opportunity to participate in the cryptocurrency market as the ban is gradually lifted.
Tightening Standards for Meme Coins: The South Korean government plans to set stricter regulatory standards for speculative assets like meme coins and adopt more stringent evidence-gathering tools to combat illegal trading. Meme coins, particularly those with strong speculative characteristics, have been highly volatile in the market and are susceptible to manipulation by speculators. This move by the South Korean government aims to curb their negative impact on the market.
Enhancing Market Compliance and Alignment with Global Rules: The FSC plans to strengthen compliance in the virtual asset market, ensuring it aligns with global cryptocurrency market regulatory standards. Financial regulators emphasize that they will engage in prudent discussions and formulation of management rules for stablecoins, conduct rules for virtual asset exchanges, and listing standards.
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