South Korea does not recognise cryptocurrencies as legal tender, yet trading is legal and runs under one of the stricter regimes in Asia. Crypto exchanges operate under close government oversight, and the rules have tightened steadily since 2021. Tax is the piece still in limbo. When this article first ran, South Korea was weighing a levy on crypto gains and planned to publish a framework in 2022. That levy has since been delayed several times and is now set to start in 2027, at 22% on annual gains above 2.5 million won.
South Korean Cryptocurrency Exchange Regulations
Running a cryptocurrency exchange in South Korea means registering with the government and following rules built to keep money laundering out, overseen by the Financial Services Commission (FSC) and its Korea Financial Intelligence Unit (KoFIU). The groundwork was laid years ago. The government banned anonymous trading accounts in 2017, and in 2018 the FSC tightened reporting for banks holding exchange accounts.
The bigger shift came through an amendment to the Act on Reporting and Using Specified Financial Transaction Information, which took effect in March 2021. It extended anti-money laundering and counter-terrorist-financing duties to every South Korean exchange and gave them a six-month grace period, so firms had to register with KoFIU by 24 September 2021 or stop operating. Trading is tied to "real-name" bank accounts: a customer has to hold an account at the same bank as their exchange to deposit or withdraw, and both the bank and the exchange verify the customer's identity under standard AML rules.
Who the Rules Apply To
The framework covers Virtual Asset Service Providers (VASPs) that carry out activities such as buying and selling crypto, crypto-to-crypto exchange, transferring virtual assets, and holding or managing them. In practice that means crypto exchanges, custodial wallet providers, and Initial Coin Offering projects, though ICOs themselves have been banned in Korea since 2017.
What Changed for Exchanges
Before the amendment, only the four largest exchanges, Bithumb, Upbit, Coinone, and Korbit, ran full real-name-account systems. The amended Act pushed the same bar onto every VASP. To register and keep operating, a firm has to:
- Hold a corporate bank account and give customers real-name accounts at the same bank.
- Run risk-based AML and KYC processes, including customer due diligence and suspicious transaction reporting.
- Apply the FATF Travel Rule (Recommendation 16), which means sharing sender and receiver data with the counterparty on a transfer. Korea's Travel Rule obligation took effect in March 2022.
- Obtain an Information Security Management System (ISMS) certificate from the Korea Internet & Security Agency (KISA).
- Report the firm's details and bank account information to KoFIU.
Operating without an approved real-name account is a criminal matter: company operators face up to five years in prison or a fine of 50 million won, roughly 37,000 US dollars.
The 2024 Virtual Asset User Protection Act
The single biggest change since the original rules is the Virtual Asset User Protection Act, which came into force on 19 July 2024. It is Korea's first law written specifically to protect crypto users rather than just police the exchanges. Under it, VASPs must keep at least 80% of customer assets in cold storage, safeguard user deposits, and steer clear of market abuse, since the Act bans price manipulation, insider dealing on non-public information, and other unfair trading. The FSC can supervise, inspect, and sanction providers that fall short.
Tax and What Comes Next
Beyond user protection, two threads are still moving. The crypto gains tax has slipped from its original 2022 target to 2023, then 2025, and now sits at 2027, partly because Korea is waiting on the OECD's Crypto-Asset Reporting Framework, which starts cross-border information sharing that year. Separately, Korea has moved against privacy coins, with exchanges delisting them to meet the Travel Rule.
The direction is consistent even as dates shift: wider AML/CFT coverage, real user protection, and tighter reporting. For any exchange dealing with Korean users, that raises the bar on onboarding and monitoring. Sanction Scanner helps VASPs meet it with Travel Rule and wallet screening plus transaction monitoring, and you can request a demo to see how it fits a crypto business. Firms should also watch for common crypto scams that these rules are designed to curb.
Sources
- Financial Services Commission (Korea), Act on the Protection of Virtual Asset Users
- Library of Congress, South Korea: Act to Regulate Cryptocurrency Markets Goes into Effect (July 2024)
- FATF, International Standards on Combating Money Laundering (Recommendation 16, Travel Rule)
