The South Korean Crypto Assets market is undergoing a major transformation in 2025: Four policy pillars reshaping the regulatory framework, with the acceleration of Spot ETFs and the pilot of the Korean Won stablecoin, advancing Compliance and innovation.

In 2025, the South Korean crypto asset market is undergoing a critical transformation from retail investor-driven to institutionalization and strong regulation, led by four major policy pillars: 1) phased opening for corporate participation (in H1 2025, non-profit organizations can sell held coins; in H2, listed companies/qualified institutions will trial trading); 2) building a framework for a spot Bitcoin ETF and a KRW stablecoin (the FSC has submitted an implementation plan); 3) cracking down on unregistered operators and KYC violations (such as local CEX being sanctioned by FIU and DAXA delisting WEMIX for the second time); 4) the central bank has suspended CBDC development and shifted to a "bank-led" stablecoin pilot (the four major banks are actively preparing). Market dynamics indicate that the KRW remains the second largest fiat currency in global crypto asset trading volume (USD 66.3 billion from the beginning of the year to now), with nearly one-third of South Korean adults holding crypto assets. Despite facing legislative challenges (951 amendments required) and geopolitical competition (accelerating Japan and Singapore), South Korea aims to establish its position as a global crypto finance hub through a balanced strategy of strict compliance and market innovation.

National Agenda: Ambition and Challenges Coexist

The South Korean Presidential Policy Planning Committee has listed "Building a Digital Asset Ecosystem" as a national agenda (belonging to the category of "Leading the World in Innovative Economy"), led by the Financial Services Commission (FSC). The industry generally refers to the direction speculated from the presidential campaign promises: approving Spot ETF, legalizing security tokens, and launching a KRW stablecoin. However, implementation faces multiple challenges:

• Non-highest priority: Not included in the 12 key strategies.
• Institutional uncertainty: The functions of the FSC may be adjusted due to government restructuring.
• Legislative complexity: 951 laws and regulations need to be revised or formulated, with a goal of submitting 87% of the amendments to Congress by 2026. Despite the ruling party having a majority and the opposition supporting crypto development, rapid legislation still faces difficulties.
• Regional competitive pressure: The U.S. "GENIUS Act" promotes the globalization of the dollar stablecoin, Japanese companies are hoarding Bitcoin, Hong Kong is improving stablecoin regulations, and the number of licenses for Singapore exchanges has doubled, all of which intensify South Korea's sense of urgency.

Regulatory Restructuring: Corporate Entry, ETF and Stablecoin Roadmap

1. Lifting of the ban on corporate trading: The FSC announced a roadmap on February 13, gradually lifting the 2017 ban in accordance with the "Virtual Asset User Protection Act" (effective July 2024):

• First half of 2025: Non-profit organizations and public institutions can sell their existing holdings.
• Second half of 2025: Listed companies and qualified institutional investors can trade on a pilot basis.

2. Spot ETF and Stablecoin Framework: FSC submitted an implementation plan for a Spot Bitcoin ETF and Korean Won stablecoin to the Presidential Committee in June, covering custody, pricing, investor protection, and cost reduction. Although current laws do not support Spot ETFs, the pro-crypto government supports reforms.
3. Central Bank shifts to "bank-first" stablecoin: The Bank of Korea (BOK) has suspended its planned CBDC pilot for the end of 2025 and is instead supporting the issuance of a won stablecoin by highly regulated banks first, gradually expanding to non-bank institutions. Deputy Governor Yoo Sang-dae clarified this path. The four major banks KB Kookmin, Shinhan, Hana, and Woori are actively preparing and will hold talks with Circle's CEO.
4. Supporting Crypto Enterprises: The Ministry of Small and Medium Enterprises proposed to amend the Risk Enterprise Law to allow crypto companies to register as risk enterprises, thereby obtaining subsidies, tax incentives, loan guarantees, and government fund support.

Iron-fisted Law Enforcement: Purifying the Market Environment

Regulators demonstrate their determination through stringent enforcement:

• Local CEX sanctions: The Financial Intelligence Unit (FIU) ordered Upbit to suspend new user registration in February due to anti-money laundering violations (involving unregistered foreign exchange trading and lax KYC). A temporary court order on March 27 allowed it to resume registration, pending a final ruling.
• Delisting of Token: The Digital Asset Exchange Alliance (DAXA) delisted WEMIX for the second time in May due to disclosure violations and a $6.6 million theft incident, causing its price to plummet 60% overnight.
• Remove illegal applications: Authorities request Google and Apple to delist unregistered exchange apps.
• Tax policy in suspense: The 20% capital gains tax originally scheduled to be implemented in January 2027 may be postponed again due to the system not being ready and the atmosphere of the local elections in 2026.

Market Dynamics: High Penetration Rate and Structural Evolution

• Trading Volume: The Korean Won ranks second globally in fiat crypto trading volume, reaching $663 billion year-to-date, accounting for about 30% of global fiat crypto activities.
• User Base: Nearly one-third of South Korean adults hold digital assets, which is twice the adoption rate of the United States.
• Exchange Landscape: Local leading CEX dominates the market with a 69% share (February data); another local CEX's share has rebounded to 25% (planning to list on KOSDAQ by the end of 2025, with this year's private stock rising 131% to 238,000 KRW); in addition, there is another local CEX with a 3% share, which sold 10% of its assets to survive due to three years of operating losses (the first case of regulatory liquidation under the new rules).
• Kimchi premium volatility: In February, the premium exceeded 10%, turned negative at the end of July, and stabilized at 2-3% in August. Analysts believe this is related to liquidity changes under tightened Compliance.
• Infrastructure and Going Global: Kakao's Klaytn and Naver's Finschia merger project Kaia aims to become the first compliant Layer-1 public chain in Asia; leading local CEX parent company Dunamu is entering Vietnam to expand South Korea's global influence.
• Geopolitical security role: On January 14, South Korea issued a joint statement with the US and Japan, warning that North Korean hackers may steal over $600 million in Crypto Assets in 2024 for weapons programs.

Outlook: The Path of Balance Determines Global Influence

The baseline scenario includes finalizing the ETF framework, launching a pilot for bank stablecoins, and expanding corporate trading, which is expected to promote capital inflow, increase liquidity, and enhance asset quality through stricter listing standards. Risk factors include over-regulation, long-term legal disputes (such as major domestic CEX cases), strict foreign exchange rules leading to capital outflow, and the chain reaction caused by token delisting. Key indicators for 2026: The legalization process of ETFs, the implementation of stablecoins, the final ruling of the FIU on major local CEXs, the performance of another local CEX IPO, and the adoption rate of Kaia and blockchain gaming projects. Seoul financial technology policy analyst Park Ji-hoon pointed out: "South Korea's ability to combine strict compliance with market innovation will make it a unique test case for global regulatory agencies." The coming year will determine whether South Korea can maintain this balance and enhance its global crypto influence. Conclusion: 2025 will be a key watershed for the Korean crypto market, transitioning from wild growth to mature regulation. Through the systematic construction of four major policy pillars, Korea is attempting to find a delicate balance between investor protection and market innovation—gradually opening up to institutional entry to inject vitality into the market, cracking down on violations to ensure ecological health, and putting aside CBDC in favor of betting on bank-issued stablecoins to reflect a pragmatic attitude. Despite facing legislative challenges and fierce regional competition, Korea, with the world's second-largest fiat trading volume for crypto assets, extremely high public participation, and a leading exchange ecosystem, has the potential to build a global crypto financial hub. If its model of "innovation within compliance" is successful, it will not only reshape the domestic market landscape but may also provide an important template for global crypto regulation. Market participants need to closely monitor milestone events such as the implementation of the ETF framework, pilot programs for bank stablecoins, and local CEX IPOs.