South Korea will allow institutional cryptocurrency trading

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The **Financial Services Commission (FSC)** of South Korea plans to gradually lift the ban on institutional cryptocurrency trading, which is expected to be implemented sometime this year. This decision marks the 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 motivations

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 that user funds are stored within financial institutions, and purchasing insurance to guard against potential losses, aimed at protecting investors and enhancing market transparency and security. The law provides a framework for compliance for cryptocurrency exchanges and markets and lays the foundation for South Korea's future opening of the cryptocurrency market.

Policy changes

Allowing institutional access to cryptocurrency 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 establish stricter regulatory standards for speculative assets like meme coins and to adopt stricter evidence-gathering tools to combat illegal trading. Meme coins, especially those with strong speculative nature, have been highly volatile in the market and are easily manipulated by speculators. The South Korean government's move aims to curb their negative impact on the market.

Enhancing market compliance in line with global rules: The FSC plans to strengthen compliance in the virtual asset market, ensuring it aligns with global cryptocurrency market regulatory rules. The financial regulatory agency emphasizes that it will engage in careful discussions and formulation regarding the management of stablecoins, the conduct rules of virtual asset exchanges, and listing standards.

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