South Korea Ends 7-Year Ban on Crypto Investment, Opening Institutional Doors

Key Takeaways

• South Korea lifts “virtual ban” on institutional crypto investments.
• The rule change would allow registered institutional firms to open accounts on crypto exchanges.
• The FSC plans to build a more inclusive crypto regulatory environment in light of the new developments.

The South Korean Financial Service Committee (FSC), the chief financial regulator, has lifted the ban on institutional crypto investment.

In December 2017, the FSC imposed a virtual ban on institutional investors investing in virtual asset markets, citing market volatility and price uncertainty as reasons.

FSC Lifts 7-Year Ban on Institutional Crypto Investments

The South Korean financial regulator has lifted the seven-year ban on institutional investors amid growing demands for crypto investment products around the globe.

Under the new rule change, South Korea intends to permit companies listed on the local stock exchange to trade virtual assets, including cryptocurrencies, on a pilot basis in the year’s second half.

The decision followed the regulators’ third virtual asset committee meeting, at which they decided to gradually open up institutional participation in the virtual currency market by permitting firms to open real-name virtual asset accounts over time.

Currently, only retail investors with registered accounts can access the crypto market. Although the institutional ban was not a direct order, the FSC has previously advised banks to prevent institutional entities from accessing trading accounts on crypto exchanges. 

FSC To Lay Out More Inclusive Regulations

The institutional crypto investment push in South Korea will be carried out in phases, with more inclusive regulations set to take effect in the coming days.

To begin this process, the FSC intends to permit cryptocurrency trading for non-profit organisations. The commission also plans to work with the Digital Asset Committee, a policy advisory organisation under its purview.

“We need to discuss how to create listing standards, what to do with stablecoins, and how to create rules of conduct for virtual asset exchanges,” FSC Secretary-General Kwon Dae-young told Yonhap. “We will work to align with global regulations in the virtual asset market.”

The FSC is also considering amending the Financial Information Act as part of this regulatory evolution.

This amendment will implement a screening process for significant shareholders of virtual asset service providers to strengthen investor protection.