South Korea Tightens Crypto Regulations Ahead of Institutional Market Entry

South Korea is rolling out a comprehensive set of new regulations as it prepares to welcome institutional investors into its digital asset ecosystem. On May 20, the Financial Services Commission (FSC) finalized its updated crypto guidelines during the fourth meeting of the Virtual Asset Committee, with the new rules set to take effect in June 2025.

Stricter Compliance for Nonprofits and Exchanges

The revised guidelines will now allow nonprofit organizations and virtual asset exchanges to engage in crypto sales — but under strict compliance standards. Nonprofits must show a minimum of five years of audited financial records and are required to establish internal Donation Review Committees to evaluate the legitimacy and liquidation plans for crypto donations.

To mitigate money laundering risks, all crypto donations must be routed through verified Korean won exchange accounts, with banks, exchanges, and nonprofits jointly responsible for compliance. Additionally, only cryptocurrencies listed on at least three major Korean exchanges will be accepted, and liquidation of donations must occur immediately upon receipt.

Tighter Exchange Controls and Token Standards

Crypto exchanges will be allowed to liquidate crypto assets received as fees, but only to cover operational costs, and within strict daily limits — typically capped at 10% of the total planned amount.

Sales are restricted to top 20 tokens by market capitalization across five Korean won-based exchanges. Moreover, to prevent conflicts of interest, exchanges are prohibited from selling tokens on their own platforms.

Guidelines regarding nonprofits selling crypto donations. Source: FSC

The FSC is also tightening listing requirements to curb volatility and reduce the proliferation of low-utility tokens. New measures include:

A minimum circulating supply requirement before listing.

Temporary market order restrictions after a new token goes live.

Increased scrutiny on zombie tokens (low liquidity and market cap) and memecoins with unclear utility.

Mandatory delisting of tokens that fail to meet engagement or liquidity standards.

Starting in June, real-name accounts will be available for exchanges and nonprofits, with listed firms and professional investors eligible for similar accounts later this year.

Political Support for Crypto Reforms

The tightening of rules comes amid growing political interest in crypto reform. Lee Jae-myung, leader of South Korea’s Democratic Party, has proposed a Korean won-pegged stablecoin to retain domestic capital and reduce reliance on foreign-backed stablecoins like USDT and USDC.

Lee also supports the legalization of spot crypto exchange-traded funds (ETFs) — a view shared by Kim Moon-soo, a candidate from the ruling People Power Party, indicating strong bipartisan momentum toward expanding South Korea’s digital asset market.