South Korea Crypto Exchange Regulations by FSC: What You Need to Know in 2025

South Korea doesn’t just allow cryptocurrency trading-it controls it. Unlike countries where crypto operates in a gray zone, South Korea’s Financial Services Commission (FSC) has built one of the strictest, most detailed regulatory systems in Asia. By 2025, these rules aren’t just about stopping fraud-they’re about bringing crypto into the mainstream financial system. If you’re trading, investing, or running a business in crypto in Korea, you need to understand exactly what’s required.

What the FSC Actually Controls

The FSC doesn’t just oversee banks and stocks. Since 2020, it has been the sole regulator for all Virtual Asset Service Providers (VASPs) in South Korea. That means every crypto exchange, wallet provider, or trading platform operating in the country must answer to them. The FSC defines a VASP as any entity that:

• Sells or buys cryptocurrencies
• Exchanges one crypto for another
• Transfers crypto between users
• Stores or manages virtual assets

If you do any of these things in Korea, you’re under FSC supervision. And there’s no loophole. Even if your company is based overseas but serves Korean customers, you still need to comply.

Real-Name Banking: No Anonymity Allowed

One of the most unique-and strict-rules in Korea is the real-name bank account system. Every user must link their crypto exchange account to a real-name bank account at the same bank as the exchange’s authorized account. You can’t use an anonymous account, a friend’s account, or a foreign bank. The exchange itself must have a dedicated real-name account at a licensed Korean bank.

Why? To stop money laundering. If someone deposits KRW 5 million from a fake account, the system flags it immediately. The FSC requires exchanges to verify identity at signup and match every deposit and withdrawal to a verified bank account. This isn’t just a formality-it’s built into the exchange’s core infrastructure.

Security Certification Is Non-Negotiable

You can’t just set up a website and start taking crypto deposits. Every exchange must pass a security audit from the Korea Internet & Security Agency (KISA). They need certification under the Information Security Management System (ISMS) standard. This isn’t a one-time check. Exchanges must maintain continuous compliance, undergo annual audits, and report any breaches within 24 hours.

The FSC doesn’t tolerate weak security. In 2023, a smaller exchange lost access to its cold wallets after failing to update its encryption protocols. The FSC shut it down within days. No warnings. No second chances.

The Travel Rule: You Can’t Send Crypto in Secret

South Korea enforces the FATF Travel Rule with a KRW 1 million (about $750) threshold. That means if you send more than that in crypto-whether Bitcoin, Ethereum, or a stablecoin-you must provide the recipient’s full name, wallet address, and account number. The sending exchange must send this data to the receiving exchange.

This rule applies to both crypto-to-fiat and crypto-to-crypto trades. It doesn’t matter if the transaction is between two Korean users or if one side is overseas. If the amount crosses KRW 1 million, the data must be exchanged.

Most exchanges automate this. When you send a large transfer, you’ll see a pop-up asking for the recipient’s real name and bank details-even if you’re sending to another Korean user. It’s not optional. And if you try to bypass it by splitting transfers into smaller amounts? That’s considered structuring, and it’s a criminal offense.

Only Four Major Exchanges-But All Must Follow the Rules

In 2020, only Bithumb, Upbit, Coinone, and Korbit had fully complied with FSC rules. That’s why they were the only ones allowed to operate legally. But since then, the FSC has cracked down on all others. By 2025, every single crypto exchange serving Korean users must be registered and certified.

There are no exceptions. Even if a platform claims to be “overseas” or “decentralized,” if Korean users can access it, the FSC can block it. In early 2025, the FSC ordered internet service providers to block access to 17 unregistered platforms. Users trying to access them got a warning page-no login, no trade, no access.

Corporate Crypto Holdings Are Changing

Since 2017, Korean companies were banned from holding cryptocurrency. The idea was to protect businesses from volatility and fraud. But in early 2025, the FSC announced a major shift.

A new pilot program allows corporations to hold crypto-under strict conditions. Companies must:

• Register with the FSC as a corporate VASP
• Use only licensed Korean exchanges
• Limit holdings to 5% of total assets
• Report all transactions weekly

Tech firms, logistics companies, and even banks are now testing this. One major Korean electronics manufacturer started holding Bitcoin as a treasury reserve in March 2025. They report every movement to the FSC. This is a huge step toward institutional adoption.

Spot Crypto ETFs Are Coming-Late 2025

One of the biggest changes coming in late 2025 is the launch of spot cryptocurrency exchange-traded funds (ETFs). Unlike futures ETFs (which are based on price predictions), spot ETFs track the actual price of Bitcoin or Ethereum.

The Korea Exchange will list these ETFs. They’ll be available through regular brokerage accounts, meaning pension funds, mutual funds, and even retail investors can buy them without touching crypto wallets.

To get approved, ETF sponsors must:

• Use only FSC-licensed custodians
• Report net asset value in real time
• Undergo quarterly audits by certified auditors
• Disclose all underlying assets and storage methods

This isn’t just for investors. It’s a signal: the FSC is ready to bring crypto into the same regulatory bucket as stocks and bonds.

What’s Still Banned?

Not everything is changing. Two major restrictions remain:

• Initial Coin Offerings (ICOs) are still illegal. The FSC banned them in 2017 and hasn’t lifted the ban. Even if a project is based overseas, if Korean investors participate, it’s considered illegal.
• NFTs are treated case by case. If an NFT is sold as an investment-like a share in a future movie or a royalty stream-it’s regulated as a virtual asset. But if it’s just a digital collectible, like a profile picture or art piece, it’s mostly ignored by regulators.

Taxes Are on Hold-For Now

South Korea planned to start taxing crypto profits in 2025. The tax would have been 20% on gains over KRW 2.5 million per year. But in April 2025, the government announced a one-year delay.

Why? The FSC said they needed more time to build a system that could accurately track cross-exchange trades and wallet transfers. They’re working with exchanges to integrate reporting tools.

Until then, crypto gains are untaxed. But don’t get comfortable. The delay isn’t a cancellation. The tax is coming, and when it does, losses can offset gains in the same year. If you lost KRW 10 million in January and made KRW 12 million in November, you’ll only pay tax on KRW 2 million.

Regional Experiments: Busan, Jeju, Incheon

While the FSC sets national rules, local governments are testing new ideas. Busan, a major port city, launched the Busan Digital Asset Nexus-a sandbox for Security Token Offerings (STOs). Companies can test tokenized real estate or equity under FSC supervision without full regulatory approval.

Jeju Island is watching closely. It’s considering allowing foreign investors to trade crypto through local exchanges without needing a Korean bank account. Incheon is exploring blockchain-based land registries.

These aren’t loopholes. They’re controlled experiments. The FSC uses them to test how new technologies behave before rolling out nationwide rules.

Why This Matters Outside Korea

South Korea isn’t just regulating its own market. It’s setting a global example. The combination of strict KYC, mandatory security audits, real-name banking, and now ETFs and corporate crypto access is a blueprint other countries are studying.

Japan and Singapore are watching how Korea balances innovation with control. The U.S. SEC is analyzing the ETF model. Even the European Union is comparing its MiCA rules to Korea’s.

The message is clear: if you want to operate in Korea, you play by their rules. And if you want to reach Korean investors, you need to meet their standards.

What’s Next? The Virtual Asset Basic Law

The biggest change is still coming. By September 2025, the FSC plans to pass the Virtual Asset Basic Law. This isn’t just another regulation-it’s a new legal framework that defines crypto as a financial asset, not just a commodity.

It will:

• Formally recognize crypto as a tradable asset under financial law
• Establish penalties for market manipulation, insider trading, and fake trading volume
• Create a licensing system for DeFi platforms
• Set standards for NFTs with financial functions

Once passed, this law will make South Korea the first Asian country to treat crypto like stocks or bonds-not just a risky gamble.