In early 2025, South Korea faced political instability following a failed coup, prompting regulatory scrutiny within the crypto sector. Significant events included the postponement of a capital gains tax, warnings about North Korean cyber threats, and measures for corporate trading accounts. Enforcement actions against exchanges were heightened, culminating in a dedicated crime investigation division and regulatory reviews for Bitcoin ETFs, as the market adapts to a more structured legal framework amidst rising crypto adoption.
South Korea began 2025 amid political turmoil, especially following President Yoon Suk Yeol’s failed military authority attempt in December. In the subsequent quarter, authorities established regulatory boundaries as they probed cryptocurrency exchanges while rescinding the ban on corporate trading accounts. Despite these challenges, record levels of crypto adoption were noted, although overall trading volumes declined significantly.
On January 1, the implementation of a 20% capital gains tax on crypto was deferred until 2027 after bipartisan agreement, marking its third postponement. This decision was influenced by fears regarding investor movement to offshore exchanges and complications in tracking profits. Lawmakers are focusing on navigating the post-coup economic landscape and addressing investor concerns arising from the political upheaval.
A joint warning on January 14 from the US, Japan, and South Korea highlighted the increasing threat from North Korean hackers targeting crypto firms. The Lazarus Group was implicated in major hacking incidents, including a $230 million breach of India’s WazirX and a $50 million attack on South Korea’s Upbit, urging firms to enhance their cybersecurity protocols.
Another significant development on January 15 saw South Korea’s Virtual Asset Committee delaying corporate access to local exchanges, despite public demand. The Financial Services Commission (FSC) focused on investor protections and regulatory reviews instead of granting immediate permissions, indicating a cautious approach towards changes in crypto legislation.
The enforcement of the Virtual Asset User Protection Act on January 16 resulted in the first indictment for market manipulation. While Upbit faced scrutiny for KYC compliance violations, the authorities considered restricting user registrations. This reflects a broader initiative to regulate the market and ensure accountability.
On January 23, Upbit and Bithumb pledged to compensate users for unrest and service outages during the martial law announcement, following user panic that caused overwhelmed networks across trading platforms. This moment underscored the vulnerability within the market and the need for stronger operational resilience.
By February 13, the FSC unveiled guidelines allowing for phased corporate crypto trading accounts, prioritising charities and universities first. The initiative mandates compliance with strict identification and anti-money laundering regulations, aiming to provide a structured pathway for institutional involvement in South Korea’s crypto landscape.
Police actions on February 21 led to the re-arrest of Jon Bur Kim, who was charged with significant fraud related to the Artube token. His activities previously resulted in substantial losses for investors during a prior scam case, highlighting ongoing challenges in enforcing accountability within the sector.
Subsequent regulatory actions on February 25 against Upbit operator Dunamu included a business suspension for KYC failures underlined by violations tied to foreign exchanges. This enforcement move further reflects the urgency of adhering strictly to compliance regulations to safeguard investors.
The establishment of a dedicated Virtual Asset Crime Joint Investigation Division on February 27 formalised efforts to combat illicit activities within the crypto space. The task force aims at intensifying enforcement and facilitating recovery from fraudulent transactions, thereby increasing overall market integrity.
On March 5, a shift was noted with the FSC exploring legal options for Bitcoin ETF approvals, as regulatory attitudes began to evolve following changes in Japan’s stance. This illustrates growing openness to considering crypto financial products that could potentially attract more investment into the South Korean market.
From March 21 onwards, the FSC initiated a crackdown on unlicensed foreign exchanges listing, leading to the blocking of 17 applications according to regulatory directives. This underscores a decisive movement to regulate the crypto environment and enforce compliance systematically.
As March closed, over 16 million Koreans held crypto accounts, outpacing stock traders for the first time. Nevertheless, this adoption coincided with a decline in trading volume, specifically at Upbit. As the crackdown progressed, expectations intensified for better governance amid an upcoming presidential election, where crypto policy is anticipated to be a pivotal topic.
