South Korea Allows Institutional Investors to Open Digital Asset Accounts

Institutional investors in South Korea can open accounts on digital asset exchanges starting in the second half of the year, according to a ruling from the country’s financial watchdog.

New Regulations

The Financial Services Commission (FSC) has been deliberating on new regulations to allow institutions to hold digital assets since 2024. Recently, in a meeting, the FSC unveiled a roadmap that gradually permits corporates to hold digital assets, effectively ending a seven-year ban imposed in 2017. This roadmap aims to ensure consumer protection and market stability.

Initial Steps

The plan allows corporates to open real-name verified accounts in the first half of the year. These accounts can only be used to sell digital assets for fiat currency. However, virtual asset service providers (VASPs) must establish industry standards to avoid potential conflicts of interest with their customers before liquidating tokens through this roadmap.

Future Developments

In late 2025, the FSC plans to expand the capabilities of corporate accounts to include other digital asset investments and financial activities.

Market Demand

The decision was influenced by the increasing demand from South Korea’s institutional investors for digital asset products. The country is recognized as one of the largest markets for digital assets, driven by a notable appetite for high-risk, high-return investments. At the rollout, 3,500 corporate entities expressed interest in participating under the new framework.

Acknowledging Risks

While the FSC recognizes the risks associated with corporate involvement in digital assets, it plans to enhance its oversight amidst increased activity. The agency has urged financial institutions to implement strict client verification processes for crypto transactions and promised to release new guidelines to help banks strengthen their verification systems.

Best Practices

The meeting also discussed best practices for listing virtual assets, urging exchanges to improve screening processes for new projects to mitigate severe price volatility that typically follows new token listings. Most new tokens can lose over 80% of their value shortly after being listed.

Upbit and Bybit Updates

As these regulations roll out, South Korea’s largest exchange, Upbit, faces billions of won in potential fines for more than 700,000 violations of Know Your Customer (KYC) regulations. The investigation may lead to significant penalties and possible suspension.

Conversely, French regulators have cleared Bybit after previously placing it on a blacklist. Bybit’s CEO announced their successful collaboration with the French regulator, who advised to avoid trading on the exchange.

Conclusion

South Korea is entering a new phase in the digital asset sector, which could reshape the landscape for institutional investment while emphasizing the importance of consumer protection and regulatory compliance.