Institutional investors in South Korea can open accounts on digital asset exchanges starting in the second half of the year, the country’s financial watchdog has ruled.
The Financial Services Commission (FSC) has been mulling new regulations that allow institutions to hold digital assets since 2024. A month ago, the watchdog said it would need more time to consider the implications of the decision.
In its most recent meeting, the FSC launched a new roadmap that will gradually allow corporates to hold digital assets in stages, ending a seven-year ban introduced in 2017. The regulator says the roadmap will be rolled out in a manner that guarantees consumer protection and maintains market stability.
It starts by permitting corporates to open real-name verified accounts in the first half of the year, through which they can only sell their digital asset holdings for fiat. However, virtual asset service providers (VASPs) will only be allowed to liquidate their tokens through this roadmap once they establish industry standards to avoid conflict of interest with their customers.
In the second half of 2025, the FSC will expand the functionalities of the corporate accounts, allowing them to engage in other digital asset investment and financial activities.
The watchdog revealed that its decision was informed by the high demand for digital asset products from South Korea’s institutional investors. The East Asian nation is one of the world’s largest digital asset markets, fueled by the country’s renowned appetite for high-risk, high-return assets.
It said that at launch, the FSC had lined up 3,500 corporate entities that had expressed interest in digital assets under the new roadmap.
“…qualified professional investors are already eligible to invest in highly risky and highly volatile derivatives products, and these corporations have demonstrated significant demand for pursuing blockchain-related business and investment opportunities,” FSC noted.
Admitting corporates into the digital asset sector comes with risks, the agency acknowledged. While it will step up its oversight to cater to the increased activity, the FSC also called on financial entities to implement strict checks on clients who engage in ‘crypto’ transactions. It also pledged to publish new guidelines to assist the banks in strengthening their verification processes.
Beyond the corporate clients, the FSC’s virtual asset meeting also addressed the best practices for listing virtual assets. In particular, it pointed out the need for exchanges to implement better screening for new projects to limit the extreme price volatility that follows immediately after a token is newly listed. Most new tokens lose over 80% of their value after listing as whales, and early investors dump on retail investors.
This volatility goes beyond South Korea. Most recently, $TRUMP and $MELANIA, two memecoins linked to the United States first family, lost over 80% after Donald Trump’s inauguration.
Upbit faces billions of won in fines; Bybit cleared in France
As the FSC launches enabling regulations for the digital asset sector, South Korea’s largest exchange faces billions of won in potential fines for violating Know Your Customer (KYC) regulations.
An investigation that started last November found that the exchange had over 700,000 violations, according to local outlet Yonhap News. Each violation could attract thousands of dollars in fines, which could result in the biggest penalty for a VASP in Asia. The outlet also cited sources within the FSC who say the exchange could be suspended for up to six months.
Speaking to legislators on Monday, FSC Governor Kim Byoung-hwan said the agency was “proceeding with the case quickly” and would conclude it soon.
Upbit is Korea’s dominant exchange, controlling nearly three-quarters of the market, with Bithumb, Coinone, and Korbit as its only sizable rivals. As such, any action by the FSC will have a seismic effect in a country where digital asset trading has occasionally outpaced stocks.
Elsewhere, French authorities recently cleared Bybit after placing the exchange on their regulatory blacklist since mid-2022. The Autorité des Marchés Financiers (AMF) had called on investors to avoid trading on Bybit and indicated that it would block the exchange’s website (although it never did).
Bybit is now in the AMF’s good graces, CEO Ben Zhou recently revealed.
“After more than two years of working with the French regulator through multiple remediation efforts, Bybit is now officially removed from France AMF blacklist,” Zhou revealed.
He added that the exchange is now pursuing a MiCA license, which its rivals like Crypto.com, OKX and most recently Bitget, have obtained.
Watch: Reggie Middleton on DeFi, booms/busts & crypto regulation
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