South Korea to Finalize Virtual Asset Legislation by 2025

South Korea is accelerating the development of its virtual asset regulatory framework, with key legislative measures expected to be finalized by the end of 2025 [1]. The Financial Services Commission (FSC) has outlined plans to complete the second phase of virtual asset legislation before the regular National Assembly session in September 2025. The upcoming Virtual Asset Basic Law is anticipated to reshape the crypto market by expanding institutional and retail investor access, enhancing market liquidity, and reinforcing the industry's legitimacy [2].

This regulatory evolution is part of a broader economic reform strategy under President Lee Jae-myung’s administration. The government has elevated the development of the crypto market to a national priority within its five-year state administration plan, signaling a commitment to fostering innovation while addressing associated risks [3]. A key component of this initiative involves reclassifying crypto trading firms as “venture companies,” a move expected to unlock access to tax incentives, subsidies, and state-backed financing [4]. This reclassification represents a significant departure from earlier policies that treated crypto firms in a manner similar to gambling venues, which had constrained their growth.

The FSC has also prioritized the regulation of stablecoins, with plans to establish a comprehensive won-backed stablecoin framework by October 2025 [5]. This initiative aims to reduce dependence on the U.S. dollar and support local digital asset ecosystems. In parallel, the government is preparing implementation measures for spot cryptocurrency exchange-traded funds (ETFs), which are expected to be launched later this year [6].

The urgency behind these regulatory developments has been driven by the rapid adoption of virtual assets among South Korean investors. Over 10,000 Koreans currently hold more than $750,000 in crypto, with young investors in their 20s holding the highest average balances, despite being the smallest demographic group [7]. As of August 5, 10,810 users across major exchanges had assets exceeding the 1 billion won threshold, with Upbit accounting for 76% of these high-value accounts [8]. The overall crypto trading population has now reached 10.86 million, representing approximately 20% of the country’s population [9].

Regulatory clarity is also being extended to stablecoin transfers and cross-border payments, informed by the Financial Action Task Force’s (FATF) updated guidelines on virtual asset transfers [10]. These changes are expected to influence how South Korea structures its own stablecoin framework, particularly in compliance and anti-money laundering measures.

Despite these progressive reforms, challenges remain. The FSC has suspended all crypto lending services after 27,600 investors borrowed 1.5 trillion won in a single month, with 13% facing forced liquidation due to market volatility [11]. Additionally, local governments have intensified enforcement, using AI tools to identify and seize hidden crypto assets from tax evaders [12].

As South Korea moves forward with its virtual asset legislation, the country is positioning itself to become a global leader in digital asset regulation. The combination of proactive government policy, growing investor participation, and a clear regulatory roadmap is expected to attract international attention and foster further innovation in the sector [13].

Source:

[1] BitcoinWorld Media. (n.d.). https://x.com/ItsBitcoinWorld/status/19603153****8183629

[2] Bitcoin World. (2025, August 21). https://bitcoinworld.co.in/south-korea-crypto-bill-2/

[4] Cryptonews. (2025, August 26). https://cryptonews.com/news/over-10000-koreans-now-hold-750k-in-crypto-as-young-investors-lead-by-holdings/

[5] Bharat Web3 Association (BWA). (n.d.). https://www.instagram.com/p/DNzh5IeZO7P/

[6] BeInCrypto. (2025, August 18). https://beincrypto.com/stablecoin-regulation-in-south-korea-warn-against-delays/

[10] Norton Rose Fulbright. (2025, August 6). https://www.nortonrosefulbright.com/en-us/inside-turkiye/blog/2025/08/the-financial-action-task-force-revises-regulations-on-virtual-asset-transfers