Korea (the Republic of)

## Retail_Trading_Status: Korea (the Republic of)

**Report Date:** 2025-06-26

**Topic:** Retail_Trading_Status

**Description:** Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

### 1. Identified Status

**Allowed-Regulated**

### 2. Detailed Narrative Explanation

Retail cryptocurrency trading is legally permitted in South Korea but is subject to a stringent and evolving regulatory framework. Individual citizens and residents can buy, sell, and hold cryptocurrencies, provided they adhere to specific rules, primarily centered around Anti-Money Laundering (AML) and Know Your Customer (KYC) obligations.

**Historical Context and Regulatory Evolution:**

Initially, the South Korean cryptocurrency market operated in a relatively unregulated space. However, concerns over speculative trading, market manipulation, and the use of cryptocurrencies for illicit activities prompted the government to introduce regulations. A significant early measure in 2018 was the restriction of cryptocurrency trading to real-name bank accounts, meaning traders must use accounts at the same bank as their cryptocurrency exchange, and both entities must verify the trader's identity. This aimed to curb anonymous transactions and enhance transparency.

A major turning point was the amendment to the **Act on Reporting and Using Specified Financial Transaction Information (Specific Financial Information Act)** in March 2020, which came into effect in March 2021. This amendment formally brought Virtual Asset Service Providers (VASPs), including cryptocurrency exchanges, under a comprehensive regulatory umbrella. It mandated that VASPs register with the Korea Financial Intelligence Unit (KoFIU), a part of the Financial Services Commission (FSC), and implement robust AML/CFT systems. These requirements include customer due diligence, suspicious transaction reporting, and obtaining an Information Security Management System (ISMS) certification from the Korea Internet & Security Agency (KISA).

**Current Regulatory Framework:**

The regulatory landscape has continued to mature with the introduction of the **Virtual Asset User Protection Act** (also referred to as the Act on the Protection of Virtual Asset Users), which was enacted on July 18, 2023, and is scheduled to take full effect on July 19, 2024. This Act further strengthens investor protection and market integrity by:
*   Mandating VASPs to safely segregate and manage user deposits and virtual assets.
*   Requiring VASPs to hold a certain percentage of users' virtual assets in cold storage.
*   Obligating VASPs to have insurance or maintain reserves to cover potential damages from hacking or system failures.
*   Establishing clear penalties for unfair trading practices, such as the use of material non-public information, price manipulation, and other illicit activities.

The Financial Services Commission (FSC) is the primary regulatory body overseeing the virtual asset market in South Korea. It has the authority to supervise, inspect VASPs, and impose penalties. The KoFIU plays a crucial role in AML/CFT compliance for VASPs.

**Key Regulatory Requirements for Retail Trading:**

*   **Real-Name Accounts:** Retail traders must use real-name verified bank accounts linked to their exchange accounts for fiat-to-crypto transactions.
*   **KYC/AML:** Exchanges are obligated to perform thorough KYC procedures to verify the identity of their customers and implement AML measures to detect and report suspicious transactions. This aligns with Financial Action Task Force (FATF) standards, including the "travel rule," which requires VASPs to collect and share information about the originators and beneficiaries of virtual asset transfers.
*   **VASP Licensing and Registration:** Only VASPs registered with the KoFIU are permitted to offer services to Korean residents. This involves meeting stringent operational and security standards.
*   **Investor Protection:** The Virtual Asset User Protection Act introduces several measures to safeguard retail investors' assets and ensure market fairness.

**Recent Developments and Future Outlook:**

South Korea continues to refine its crypto regulatory framework. There are ongoing discussions and plans regarding:
*   **Taxation:** While previously a gray area, the government has been considering and developing a taxation framework for profits from crypto transactions. Some reports indicate a 20% capital gains tax on crypto profits exceeding 2.5 million won annually, though implementation timelines have seen adjustments.
*   **Institutional Participation:** While currently focused on retail trading, authorities are gradually exploring pathways for institutional investors to participate in the crypto market, with guidelines expected.
*   **Spot Crypto ETFs:** The FSC has submitted plans to potentially introduce spot crypto ETFs by the second half of 2025, which could significantly impact the retail investment landscape.
*   **Stablecoin Regulation:** Specific regulations for stablecoins are also under development as part of a "Phase 2" legislative initiative.
*   **Transaction Fees:** The FSC has indicated it will investigate cryptocurrency exchange fees to assess their fairness and potentially reduce trading costs for investors.

The South Korean government has emphasized its commitment to fostering a transparent and secure virtual asset market while protecting users. The regulatory approach aims to balance innovation with investor protection and financial stability. Retail trading is clearly allowed but within a tightly controlled and increasingly comprehensive legal structure.

### 3. Specific, Relevant Text Excerpts

*   **Freeman Law (referencing the March 2020 Amendment to the Act on the Reporting and Use of Specific Financial Transaction Information):** "The legislation provides a regulatory framework for cryptocurrencies and related services and activities, officially legalizing cryptocurrency in South Korea and mandating certain compliance measures."
*   **Sumsub (FAQ section):** "Is crypto legal in South Korea? Yes, it is legal. Anyone in South Korea can own and use cryptocurrency. The government of South Korea ensures that virtual asset service providers make the transaction process safe through several guidelines and acts."
*   **Sanction Scanner (regarding VASP requirements):** "The South Korean government amended existing legislation in 2020, extending mandatory anti-money laundering and counter-terrorist financing obligations to all South Korean exchanges and requiring firms to obtain a license to operate from the Financial Services Commission's Financial Intelligence Unit by the end of September 2021."
*   **Korea.net (on the Virtual Asset User Protection Act):** "The Act was enacted on July 18, 2023 with aims to protect virtual asset users and establish a sound order in the virtual asset market. The Act mandates virtual asset service providers (VASPs) to safely keep and manage users' deposits and virtual assets. The Act also establishes legal grounds to impose penalties and sanctions on unfair trading activities, such as the use of material nonpublic information and price manipulation."
*   **National Law Information Center (Virtual Asset User Protection Act, Article 1 - Purpose, unofficial translation):** "This Act aims to protect the rights and interests of virtual asset users and to establish a transparent and sound trading order in the virtual asset market by prescribing matters concerning the protection of virtual asset users' assets and the regulation of unfair trade practices."
*   **Financial Services Commission (Press Release on Enforcement Decree of Virtual Asset User Protection Act, December 11, 2023):** "The ｢Virtual Asset User Protection Act｣ was enacted to protect virtual asset users and establish a sound transaction order in the virtual asset market. This law defines virtual assets and objects excluded from virtual assets, and imposes obligations on virtual asset business operators to safely store and manage users' deposits and virtual assets. In addition, it prepared grounds for sanctions such as criminal punishment and fines for unfair virtual asset trading practices such as use of undisclosed important information and market price manipulation."
*   **Deloitte (on the future outlook):** "In February 2025, the Financial Services Commission announced a 'roadmap for corporate participation in the virtual asset market' to allow corporate participation in digital assets in stages. The possibility of allowing trading of cryptocurrency-based ETFs has also been somewhat suggested, but it is scheduled to be discussed later on the premise of reorganizing related systems such as legislation, foreign exchange, and taxation, so it is difficult to predict the timing."

### 4. Direct, Accessible URL Links

1.  **Act on Reporting and Using Specified Financial Transaction Information (Specific Financial Information Act):** While a direct English version of the latest consolidated act can be hard to find from an official government source, summaries and implications are widely discussed by legal and consulting firms.
    *   *Korean:* 국가법령정보센터 (National Law Information Center): [https://www.law.go.kr/LSW/lsInfoP.do?lsId=002048&efYd=20210325#0000](https://www.law.go.kr/LSW/lsInfoP.do?lsId=002048&efYd=20210325#0000) (This link is to the law itself in Korean, the effective date mentioned in the URL might be an older version, users should search for "특정 금융거래정보의 보고 및 이용 등에 관한 법률" for the latest version).
    *   *Summary in English by Legal 500:* [https://www.legal500.com/developments/thought-leadership/amended-act-on-reporting-and-using-specified-financial-transaction-information-now-governs-virtual-assets/](https://www.legal500.com/developments/thought-leadership/amended-act-on-reporting-and-using-specified-financial-transaction-information-now-governs-virtual-assets/)
    *   *Summary in English by Kim & Chang:* [https://www.kimchang.com/en/insights/detail/act-on-reporting-use-of-specific-financial-information-amended-key-implications](https://www.kimchang.com/en/insights/detail/act-on-reporting-use-of-specific-financial-information-amended-key-implications)
2.  **Virtual Asset User Protection Act (Act on the Protection of Virtual Asset Users):**
    *   *Korean:* 국가법령정보센터 (National Law Information Center): [https://www.law.go.kr/LSW/lsInfoP.do?lsId=020489&viewCls=lsRvsDocInfoR&urlMode=lsInfoP#0000](https://www.law.go.kr/LSW/lsInfoP.do?lsId=020489&viewCls=lsRvsDocInfoR&urlMode=lsInfoP#0000) (Search for "가상자산 이용자 보호 등에 관한 법률")
    *   *English Overview by Korea.net (an official government portal):* [https://www.korea.net/Government/Current-Affairs/Regulatory-Reform/view?articleId=250006](https://www.korea.net/Government/Current-Affairs/Regulatory-Reform/view?articleId=250006)
    *   *English Version (unofficial translation, often available on government legislation sites):* [https://elaw.klri.re.kr/eng_service/lawView.do?hseq=67090&lang=ENG](https://elaw.klri.re.kr/eng_service/lawView.do?hseq=67090&lang=ENG)
3.  **Financial Services Commission (FSC) Website:** (Primary regulatory body)
    *   [https://www.fsc.go.kr/eng](https://www.fsc.go.kr/eng) (English site for general information and press releases)
    *   *Press Release on Enforcement Decree of Virtual Asset User Protection Act (Korean):* [https://www.fsc.go.kr/no010101/80157?srchCtgry=&curPage=1&srchKey=&srchText=&sDate=&eDate=](https://www.fsc.go.kr/no010101/80157?srchCtgry=&curPage=1&srchKey=&srchText=&sDate=&eDate=)
4.  **Korea Financial Intelligence Unit (KoFIU) Website:** (Part of FSC, responsible for AML/CFT)
    *   [https://www.kofiu.go.kr/eng/](https://www.kofiu.go.kr/eng/) (English site)
5.  **Reputable Secondary Sources:**
    *   *Sumsub (Crypto Regulations in South Korea):* [https://sumsub.com/blog/south-korea-crypto-and-travel-rule-regulations/](https://sumsub.com/blog/south-korea-crypto-and-travel-rule-regulations/)
    *   *Sanction Scanner (New Crypto Regulations in South Korea):* [https://sanctionscanner.com/blog/new-crypto-regulations-in-south-korea-1065](https://sanctionscanner.com/blog/new-crypto-regulations-in-south-korea-1065)
    *   *Freeman Law (South Korea Cryptocurrency Laws):* [https://freemanlaw.com/south-korea-cryptocurrency-laws-and-regulation/](https://freemanlaw.com/south-korea-cryptocurrency-laws-and-regulation/)
    *   *Chambers and Partners (Introduction to South Korea Law - Fintech):* [https://chambers.com/content/item/12740](https://chambers.com/content/item/12740) (This is a general link, specific crypto details are within their guides)
    *   *AInvest (South Korea Plans Spot Crypto ETFs by 2025):* [https://www.ainvest.com/news/south-korea-plans-spot-crypto-etfs-by-2025-to-boost-market-2651000i/](https://www.ainvest.com/news/south-korea-plans-spot-crypto-etfs-by-2025-to-boost-market-2651000i/)