South Korea Set to Unlock Institutional Crypto Investment With Landmark New Guidelines

In a move set to reshape its thriving cryptocurrency market, South Korea's Financial Services Commission (FSC), the nation's top financial regulator, has announced plans to issue comprehensive guidelines for institutional cryptocurrency investment by the third quarter of this year, according to a report in The Block .

This initiative marks a significant policy shift, effectively lifting the existing de facto ban on institutional participation in the crypto market and opening the door for substantial capital inflow.

While the broader investment guidelines for public companies and professional investors are targeted for release in Q3, the FSC indicated an even faster pace for specific entities, aiming to publish guidelines for non-profit organizations and cryptocurrency exchanges as early as April.

This gradual lifting of restrictions began in January when the FSC first announced its intention to permit institutional crypto investment. Last month, the regulator further clarified its phased approach, revealing plans to initially allow charities and universities to liquidate their existing cryptocurrency holdings starting in the second quarter. The upcoming detailed guidelines represent the next, and most significant, step in this liberalization, paving the way for active institutional investment in the sector.

FSC vice chairman Kim So-young emphasized the urgency and strategic rationale behind this policy shift during Wednesday's meeting. He acknowledged that the more crypto-friendly stance of the US administration under President Trump is driving global momentum and accelerating discussions around digital assets, prompting South Korea to expedite its own regulatory framework.

Kim stated that the forthcoming guidelines will focus on establishing "best practices" for institutional crypto investment. These will include clear standards for cryptocurrency trading activities, robust disclosure requirements, and comprehensive reporting obligations. He also urged domestic banks and cryptocurrency exchanges to bolster their anti-money laundering (AML) and cybersecurity protocols to proactively mitigate potential risks associated with illicit activities and cyberattacks. Under current South Korean regulations, cryptocurrency exchange users are already required to verify their accounts using real-name bank accounts, and the new guidelines are expected to build upon these existing safeguards.

The potential entry of institutional investors into the South Korean cryptocurrency market is expected to have a transformative impact. South Korea is already one of the world's largest and most vibrant retail crypto markets, with an estimated 15.6 million citizens, roughly 30% of the population, actively trading cryptocurrencies as of late 2024.