South Korea regulates one of the world's most active retail crypto markets through a two-phase plan. Phase one, the Virtual Asset User Protection Act, has been in force since July 19, 2024: exchanges must keep at least 80% of customer coins in cold storage, carry insurance or reserves against hacks, segregate customer deposits with banks that pay interest on them, and face the harshest market abuse penalties in any crypto statute, up to life imprisonment where unfair-trading gains exceed ₩5 billion. Beneath it sit the 2021 Specific Financial Transactions Act registration regime, real-name bank account requirements, and ISMS security certification, which together consolidated trading onto a handful of licensed exchanges.
Phase two, covering market structure, token issuance and listing, and won-denominated stablecoins, stalled through 2025 and into 2026 on a single dispute: the Bank of Korea insists stablecoin issuers be at least 51% owned by regulated banks, while ruling-party lawmakers back broader eligibility. The disagreement has pushed the framework's likely completion toward 2027. Meanwhile corporate trading accounts began phasing in during 2025, spot crypto ETFs remain barred pending legislation, and the deferred 20% tax on crypto gains is scheduled for 2027.
The instruments
Virtual Asset User Protection Act
Custody standards (80% cold storage, insurance or reserve funds), segregation and interest on customer cash, exchange obligations to monitor abnormal trading, and criminal prohibitions on manipulation and use of undisclosed information.
Specific Financial Transactions Act (VASP registration)
Virtual asset service providers must register with the Financial Intelligence Unit, hold ISMS certification, and partner with banks for real-name deposit accounts; the requirements forced most smaller exchanges out of the won market.
Phase-two framework and won-stablecoin legislation
Would establish issuance and listing rules, self-regulatory structure, and licensing for won-denominated stablecoin issuers. Deadlocked over the Bank of Korea's demand for 51% bank ownership of issuers; passage has slipped, with implementation now expected no earlier than 2027.