South Korea Transitions Crypto Listing Regulation to Direct Government Oversight

Executive Summary

South Korea's Financial Services Commission (FSC) is transitioning the regulation of cryptocurrency exchange token listings from a self-regulatory model to direct government supervision. This initiative seeks to increase regulatory scrutiny on cryptocurrency exchanges, leading to more stringent listing requirements, enhanced transparency, and improved investor protection. The move is anticipated to foster a more mature and regulated crypto market in South Korea, potentially attracting greater institutional investment.

The Regulatory Shift in Detail

The Financial Services Commission (FSC) is actively working to transform the existing self-regulatory framework for digital asset exchanges into a public regulatory system. Euh Wookheon, Chairman of the FSC, outlined these initiatives during a parliamentary audit on October 20, emphasizing the goal to bolster trust, market transparency, and investor protection by legally codifying listing procedures and disclosure standards. The proposed Digital Asset Basic Act (DABA), with its legislative bill introduced to the National Assembly in June 2025, is central to this reform. The DABA is anticipated to be enacted by the end of 2025 and implemented in 2026.

Key elements of the DABA include revising terminology from "virtual assets" to "digital assets" to align with global standards and refining legal definitions based on distributed ledger technology. The act also aims to strengthen regulatory oversight over digital asset operators and establish stricter standards for asset listing and disclosures. Under the new system, exchanges will be legally required to draft comprehensive listing rules covering criteria for listing and delisting, trading suspension and resumption protocols, and robust disclosure requirements. These disclosure obligations are intended to mirror practices seen in traditional securities markets, with increased oversight on asset issuances and listings to enhance market fairness.

Deconstructing the Financial Mechanics

The new regulatory framework introduces specific financial and operational requirements for digital asset service providers (VASPs). All VASPs, including exchanges, brokers, and custodians, will be required to obtain a license from the FSC and adhere to minimum capital requirements. For exchanges, this threshold is set at KRW 500 million. Furthermore, the regulations mandate stringent cybersecurity criteria and anti-money laundering (AML) standards. Custodians will be required to segregate client assets from their proprietary assets or place them in trust, with an annual audit by a certified public accountant (CPA) to confirm the integrity of client asset management.

Stablecoin regulation is also being significantly tightened. The FSC plans to introduce a licensing system for stablecoin issuers, legally guarantee users' redemption rights, and mandate issuers to hold reserve assets equivalent to over 100 percent of issued stablecoins in highly liquid assets such, as cash or government bonds.

Business Strategy and Market Positioning Implications

The shift to direct government oversight will necessitate significant strategic adjustments for cryptocurrency exchanges and other VASPs in South Korea. Exchanges will need to develop and enforce comprehensive, legally-binding listing rules, moving away from discretionary self-regulation. Enhanced disclosure requirements will demand sophisticated internal reporting and compliance mechanisms, increasing operational costs and complexity. Internal control mandates will be established to prevent unfair practices such as insider trading and front-running, requiring robust monitoring and enforcement systems within these entities.

New compliance standards, effective June 2025, also target token sales and listings. Nonprofit organizations selling crypto donations must meet criteria such as five years of audited financial history and routing all donations through verified Korean won accounts. Exchanges are restricted from selling tokens on their own platforms to prevent conflicts of interest and are limited to liquidating user fees in crypto only for operational costs, capped daily. Stricter listing standards will include requirements for a minimum circulating supply, temporary market order restrictions post-listing, and increased scrutiny for "zombie tokens" and memecoins lacking clear utility. Exchanges will be mandated to delist tokens that fail to meet specific liquidity benchmarks or community engagement thresholds. A new statutory self-regulatory organization, under FSC and FSS oversight, will centralize token listing reviews and market surveillance, replacing fragmented, exchange-led processes.

Broader Market and Global Context

South Korea's regulatory reforms align with a broader global trend towards increased oversight and formalization of the cryptocurrency market. Countries worldwide are moving from a largely unregulated environment to actively constructing clear regulatory frameworks. This global policy shift, exemplified by the EU's Markets in Crypto-Assets Regulation (MiCAR) which became fully operational in December 2024, signals the end of the industry's chaotic growth era and its transition towards compliance and integration with traditional finance.

Other jurisdictions are also tightening their crypto regulations. Taiwan's Financial Supervisory Commission (FSC) is implementing stricter rules for crypto asset listings by January 2025, requiring VASPs to complete compliance registration and adhere to detailed protocols for custody, information security, and disclosure. The UK is advancing an extensive regulatory framework, with consultations on detailed rules for trading, custody, disclosures, and staking planned for 2025 and full implementation in 2026. The U.S. SEC's approval of universal listing standards for cryptocurrency Exchange Traded Products (ETPs) also reflects this global shift towards regulatory clarity and market maturation. This concerted global effort aims to enhance investor protection, mitigate systemic risks, and foster a more stable environment conducive to attracting institutional investors into the digital asset ecosystem.