South Korea Prepares Regulatory Phase 2

South Korea is set to unveil the second phase of its cryptocurrency regulatory framework in the latter half of 2025.

On January 15, the Financial Services Commission (FSC) convened its second Virtual Asset Committee meeting to outline the next stage of the Virtual Asset User Protection Act.

Key Legislative Tasks Under South Korea’s Next Regulatory Era

Local media reported the discussions, held at the government complex in Seoul. Based on the report, the meeting focused on major legislative tasks. Specifically, the Virtual Asset Committee outlined several major tasks for the second phase.

Under virtual asset operators, the committee’s first task is to strengthen regulations on entry and business activities. This will ensure transparency and protect users from unsound practices.

The second task involves trading regulation. The framework will establish a transparent listing and disclosure system to enhance user protection. Discussions included the introduction of periodic disclosure systems similar to those employed in capital market practices.

It also reviewed international trends, including stablecoin regulations. In this regard, the Virtual Asset Committee will review global trends and regulatory frameworks to impose stricter obligations on stablecoin issuers. This would ensure asset reserves and redemption rights.

Reportedly, Vice Chairman Kim So-young noted that South Korea must align with global regulatory trends. He cited the European Union’s Virtual Asset Market Act (MiCA) and similar initiatives in Hong Kong and Singapore. The US has also prioritized stablecoin regulations, a key focus of South Korea’s upcoming legislative phase.

“Our regulatory system aims for an integrated law. The policy review is nearing completion after 12 subcommittees and working-level task force discussions. We will report the results to the Virtual Asset Committee as soon as possible and ensure that follow-up procedures follow,” local media reported, citing Kim So-young.

The FSC plans to form task forces and subcommittees to review these projects, aiming to prepare a detailed second-stage bill by H2 2025.

Meanwhile, the first phase of the Virtual Asset User Protection Act marked the beginning of South Korea’s regulatory era. As BeInCrypto reported, the initial stage led to significant developments, including Upbit’s public disclosure under the new law.

However, Upbit, the largest crypto exchange in South Korea, faced antitrust investigations, with the FSC flagging over 600,000 potential KYC (Know-Your-Customer) violations. The government’s scrutiny has raised questions about exchange practices, with Vice Chairman Kim emphasizing the need for a comprehensive regulatory overhaul.

Addressing Past Controversies

South Korea’s regulatory journey has not been without challenges. In 2019, North Korea stole 342,000 Ethereum (ETH) from Upbit, drawing attention to the need for better security measures. The FSC’s efforts to tighten regulations include addressing these vulnerabilities while balancing innovation and stability.

The government has also announced plans to lift its ban on corporate crypto investment, signaling its commitment to fostering institutional participation.

Despite its high delisting rate, South Korea remains a significant player in the global crypto market. According to BeInCrypto, the country ranks third among leading crypto hubs after Dubai and Switzerland. Moreover, South Korea recorded a surge in crypto transactions, reflecting growing adoption and the public’s resilience amid regulatory shifts.

The FSC’s focus on achieving a balance between innovation and stability is evident in its approach to the Virtual Asset User Protection Act. By fostering a transparent and secure ecosystem, South Korea aims to become a global leader in virtual asset regulation.

As the country prepares for the second phase of its crypto regulatory framework, it sets a precedent for other nations amid a fast-paced digital assets market.