[Gang Ryeon-ho's Crypto Insights] Why the Government Differentiates Corporate Participation in the Virtual Asset Market

# South Korea's Financial Services Commission Approves Corporate Cryptocurrency Transactions In a pivotal move, South Korea's Financial Services Commission (FSC) has reversed its longstanding ban on corporate cryptocurrency trading. The decision, aimed at safeguarding cryptocurrency users and ensuring market stability, will introduce corporate real-name accounts for cryptocurrency transactions in a phased manner. The FSC stressed that the introduction will be driven by assessments of cryptocurrency associations and associated risks. The roadmap outlines three stages: 1. Immediate approval for law enforcement agencies. 2. Starting in Q2 of 2025, permissions will be extended to non-profits and cryptocurrency exchanges for corporate accounts meant solely for liquidation purposes, aiding in selling transactions. 3. In the latter half of 2025, corporate cryptocurrency trading will be allowed for registered professional investors, including publicly listed corporations or specialized investment entities, but excluding financial institutions. The FSC also noted that broader access for general corporations will be evaluated long term, alongside updates to foreign exchange and tax regulations. Exchange-Traded Funds (ETFs) related to cryptocurrencies remain under careful review due to global regulatory hesitations. # Aligning with Global Standards and Local Specifics The FSC's forward-thinking approach aligns South Korea with global standards. Many jurisdictions, especially in Europe, the United States, and Japan, permit corporate cryptocurrency trading while imposing more restrictions on individual transactions. For instance: - In the U.S., despite state-level variance, both individuals and corporations face minimal restrictions on cryptocurrency trading. - The EU and Japan broadly facilitate corporate trading in crypto assets. - Hong Kong allows large corporations to engage in the cryptocurrency market with minimal oversight, whereas individual investors are generally limited to major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). - Singapore permits wide corporate participation but restricts individuals, including bans on credit card transactions, personal marketing campaigns such as airdrops, and leveraged trading. South Korea’s latest stance reflects a pragmatic acceptance of the global shift towards institutionalizing crypto markets while maintaining regulatory oversight for user protection and anti-money laundering (AML) measures. # Historical Context and Motivations for Change Before this new decision, certain institutions like law enforcement, tax authorities, and customs agencies had limited, case-by-case permissions to hold and liquidate cryptocurrency due to the need to manage confiscated assets from criminal activities. This allowance helped these agencies avoid significant obstacles in handling seized assets. Similarly, non-profits such as educational foundations faced challenges. Cryptocurrency donations from blockchain companies or wealthy individuals often couldn't be liquidated, hindering the use of donated funds for educational purposes. The FSC has now allowed non-profits to open corporate accounts for this purpose, provided they comply with internal control standards. Some experts question the priority given to non-profits for corporate accounts over traditional financial firms and corporations, pointing to heightened scrutiny of non-profits regarding AML compliance from global bodies like the FATF. This regulatory approach might reflect the relatively low involvement of non-profits in the cryptocurrency market, posing less systemic risk. # Early Permissions for Cryptocurrency Exchanges Cryptocurrency exchanges will gain access to corporate accounts starting in the second quarter of 2025, but only for liquidation transactions to cover operational expenses such as taxes and salaries. Critics argue that prioritizing exchanges—considered high-risk concerning AML compliance—over financial institutions and professional investors may not be prudent. However, the FSC aims to balance cultivating the crypto market with integrating digital assets into the traditional financial system. To ensure compliance with the Special Financial Information Act and the newly enacted Crypto Asset Protection Law, which prohibits proprietary trading by exchanges, the FSC plans to establish additional safeguards and policies before enacting these permissions. # Expansion to Professional Investors and General Corporations From the latter half of 2025, corporate accounts will also be available to professional investors, such as publicly traded companies and registered specialized investment firms. This move is expected to attract foreign corporations to register as professional investors, boosting the South Korean crypto market. Analysts foresee increased interaction between crypto markets and the traditional financial sector, marking significant progress for South Korea’s digital asset ecosystem. As a result, blockchain-related businesses and professional investment opportunities are poised to expand. Full-scale corporate cryptocurrency trading remains a long-term goal. Experts question the necessity of distinguishing between general corporations and professional investors, arguing that corporations with low AML risks should already be able to trade at a professional level. As general corporations often have limited interaction with the traditional financial sector, the FSC’s concerns over regulatory interdependencies between digital and traditional finance may not fully justify the delayed timetable. # About the Author: Kang Ryeon-ho, Financial and Legal Expert Kang Ryeon-ho is a seasoned expert in financial regulation, digital finance, cryptocurrency compliance, and anti-money laundering. A partner attorney at Law Firm Sejong, he advises banks, fintech companies, and crypto firms. Kang's experience includes oversight of digital asset regulation and AML compliance at the FSC. As a certified Anti-Money Laundering Specialist (CAMS), he has contributed to regulatory policy through South Korea’s Financial Information Unit.