Blockchain Developments in the Last 12 Months

The blockchain industry in Korea continues to demonstrate steady growth in terms of the number of participating enterprises. As of 2023, there were 472 blockchain service providers, which reflected a 15.1% increase from the previous year (410 providers). This figure is projected to reach approximately 530 by 2024. Since 2019, the sector has consistently recorded double-digit annual growth, underscoring the expanding integration of blockchain technology across various industries.

Korea’s digital asset market has historically been primarily concentrated around virtual asset exchanges. However, traditional financial institutions, including major commercial banks and securities companies, have recently started to actively engage in the digital asset sector. Leading banks are notably collaborating together to offer virtual asset custody services through specialised digital asset custody firms for corporate and institutional clients. Interest in stablecoin issuance has also risen following the introduction of regulatory frameworks for stablecoins.

At the same time, in anticipation of the legalisation of security token offerings (STOs), the Korea Exchange, the Korea Securities Depository and major securities firms have formed a consortium to develop platforms for the issuance and trading of tokenised securities, initiating preparations for the forthcoming regulatory environment. Additionally, some commercial banks are conducting cross-border remittance pilots using stablecoins in partnership with global banks. Elsewhere, the Korea Federation of Banks is participating in research on the utilisation of central bank digital currencies (CBDCs). These developments reflect the broader efforts within the financial sector to explore new business opportunities utilising blockchain technology.

Outlook for the Next 12 Months

As the number of blockchain-related enterprises is expected to continue increasing during 2025, the application of blockchain technology is anticipated to expand across a wide range of sectors, including data transactions, authentication and financial transaction infrastructure. In addition, with privacy-enhancing technologies such as zero-knowledge proofs (ZKPs) being piloted by domestic financial institutions to enhance blockchain usability while safeguarding personal information, it is expected that next-generation blockchain technologies will see broader adoption in services provided by Korean companies in 2025.

From the perspective of the digital asset market, changes in regulatory policy by financial supervisory authorities are likely to facilitate the participation of corporations in the digital asset market, leading to market expansion and the introduction of diverse services and new business models. Furthermore, following the formation of a new government after June, more favourable policy changes towards digital assets are anticipated.

To support the implementation of blockchain technology, major manufacturing conglomerates have applied blockchain to supply chain management to strengthen traceability of items and parts and to authenticate genuine products. In the distribution sector, blockchain-based food traceability systems have been implemented to enhance consumer trust. In the entertainment industry, agencies have explored new business models by utilising non-fungible tokens (NFTs) on platforms for the sale of digital goods and to enhance ticket authentication procedures. In the gaming sector, companies such as Wemade and Com2uS have developed blockchain gaming platforms and launched play-to-earn (P2E) games targeting overseas markets.

In the financial sector, Korea’s first pilot project to test the usability of CBDC was carried out by the Bank of Korea in collaboration with commercial banks to verify the technical feasibility and potential applications of CBDC. There are increasingly broader practical use cases of blockchain technology. Some fintech companies have notably launched blockchain-based cross-border remittance services. Meanwhile in the insurance sector, blockchain technology has been applied through the introduction of automatic insurance claim systems utilising smart contracts.

In the domestic virtual asset exchange market, the duopoly of the two centralised exchanges, Upbit and Bithumb, continues to dominate. Due to stringent regulatory restrictions imposed by the financial supervisory authorities, there is an absence of business models, such as decentralised finance (DeFi), stablecoins and funds, to emerge beyond centralised exchanges and custody services. However, ahead of the gradual broadening of market participants to include corporate and institutional investors in the virtual asset market, virtual asset service providers (VASPs) operating over-the-counter-based trading or exchange businesses for managing corporate assets have recently been approved for registration. Additionally, there is a VASP which completed reporting to FIU as a custody business and is conducting node operation activities on several blockchain networks.

There is no law or regulation in Korea that provides for the effectiveness of the issuance of, registration of, transfer of, or creation of a pledge on digital assets including security tokens with an irrevocable effect (ie, finality) that are registered on a blockchain-based distributed ledger.

However, there is a legislative proposal including relevant regulations on this issue, although it has not yet been enacted into law. The proposed amendment to the Act on Electronic Registration of Stocks and Bonds (the “AERSB”) includes recognising distributed ledger-registered securities as a type of electronically registered security.

The proposed amendment does not distinguish between the validity and effectiveness of registration on a distributed ledger from that of the existing conventional electronic registration framework. If the proposed amendment passes, the provisions relating to the validity and effectiveness of the existing conventional electronic registration and effective transfer of electronically registered securities, etc, under the current AERSB will therefore apply to distributed ledger-registered securities, as follows.

• For electronic securities held by an account management institution, the securities will be registered in the “proprietary account book” of the account management institution managed by an electronic registry. For the electronic securities held by ordinary customers, the securities will be registered in the “customer account book” managed by the account management institution (the “customer account book” and the “proprietary account book” will together form the “electronic register”). Any person registered in the electronic register may rely on the presumption that the person has lawfully acquired the legal rights to the relevant electronically registered securities.
• In terms of transferring electronic securities, the transfer becomes effective at the time the transferor’s account is debited and the transferee’s account is credited in the “electronic register”.
• The creation of a pledge on electronic securities will take effect after the registration of the fact that the electronic securities are subject to the pledge and the relevant pledgee’s details in the “electronic register”.
• In terms of securities that are electronically registered as a trust property, the relevant trustee may rely on the effectiveness of the registration to defend against any third-party claims towards the registered securities.

At the time of writing, the proposed amendment is still being considered by the relevant committee and no substantive discussion has progressed.

There is currently no law or regulation, nor any official method, in Korea to legally categorise the types of digital assets. However, the existing relevant laws and regulations can be applied to certain digital assets depending on their legal nature. In practice, digital assets are therefore classified based on the applicable laws.

The Financial Investment Services and Capital Markets Act (the “FISCMA”) applies to a “financial investment instrument”. This essentially means a right acquired by an agreement to pay money or anything else with property value (“money, etc”) at a specific time in the present or the future, with the intention to earn a profit or avoid a loss, where there is a risk that the total amount of the money, etc, paid or payable to acquire that right may exceed the total amount of money, etc, already recovered or recoverable from the right (including sums such as termination fees). Digital assets that are subject to the FISCMA will therefore be categorised as a “security token”.

Virtual asset exchanges in South Korea mostly request that applicants for virtual asset listing submit a legal opinion stating that the subject digital asset is not categorised as a security. Additionally, when an exchange chooses to list a virtual asset on its own initiative, it independently assesses whether the asset may be classified as a security.

Under the Electronic Financial Transactions Act (the “EFTA”), electronic payment means refer to electronic fund transfers, electronic debit payment means, electronic prepayment means, electronic currency, credit cards, electronic bonds or other means of payment by electronic means. Digital assets that are subject to the EFTA will therefore be categorised as a “payment token” at a practical level.

Whether a digital asset qualifies as an “electronic prepayment means” or electronic currency is often considered.

The term “electronic prepayment means” means any certificate (or information on the certificate) issued with transferable monetary values stored by electronic means that meets all of the following requirements (excluding any electronic currency).

• It will be used to purchase goods or services from a third person other than the issuer and pay the prices.
• It will be able to purchase goods or services in any business category as provided under the Korean Standard Industrial Classification.

However, under the EFTA, prepaid electronic payment instruments presuppose a centralised issuer and the Financial Services Commission (the “FSC”) has issued an authoritative interpretation that tokens not pegged to the value of fiat currency cannot qualify as prepaid electronic payment instruments. Digital assets that are not issued at a fixed fiat value and are created through decentralised means therefore do not generally fall within the scope of prepaid electronic payment instruments. Tokens that do not qualify as prepaid electronic payment instruments are instead classified as virtual assets therefore. The tokens used primarily for payment purposes are further categorised as "payment tokens”.

Under the Virtual Asset User Protection Act (the “VAUPA”), there is a general definition of “virtual assets”. “Virtual assets” are defined as electronic representations (including all rights thereto) that have economic value and that can be traded or transferred electronically, except for the following:

• electronic representation or information about the representation that cannot be exchanged for money, goods, or services, etc and the purpose and use of which is restricted by the issuer;
• tangible and intangible products obtained through the use of game products under Article32(1)-7 of the Game Industry Promotion Act;
• electronic prepayment means under Article 2(14) of the EFTA as well as electronic currency under Article 2(15) of the EFTA;
• electronically registered stocks under Article 2(4) of the AERSB;
• electronic bills under Article 2(2) of the Issuance and Distribution of Electronic Bills Act;
• electronic bills of lading under Article 862 of the Commercial Act;
• electronic forms of currency issued by the Bank of Korea pursuant to the Bank of Korea Act and related services;
• electronic bonds as defined under Article 2(16) of the EFTA;
• gift certificates issued with a set monetary value or quantity of goods/services, which are stored and used on mobile devices;
• deposits and equivalent electronic instruments processed in digital form by legally designated banks through the Bank of Korea’s electronic currency issuance and management network; and
• non-fungible electronic instruments that exist in a singular form and are not interchangeable with other instruments, such as those issued primarily for collection purposes or solely for the purpose of transaction verification between parties.

The enforcement decree of the VAUPA further excludes NFTs, which are electronic tokens that exist uniquely and cannot be mutually replaced, primarily available for collection purposes or for confirming transactions between parties, from the scope of “virtual asset” Digital assets falling under this category are therefore generally considered to be “utility tokens”. Please see 2.5 Other Digital Assets for details.

There are currently no laws or regulations applicable to digital assets categorised as stablecoins. The relevant laws and regulations may be provided under the proposed pieces of legislation relating to virtual assets or the amendments to the EFTA depending on research, discussion and consultation among the FSC, Ministry of Finance, Bank of Korea, and the National Assembly.

In Korea, there are no specific laws that allow tokenised securities or that provide for traditional securities to be issued in the form of tokens. No traditional securities have therefore been issued in the form of tokens.

However, under the Special Act on Support for Financial Innovation (the “SASFI”), if certain tokenised securities meet several requirements, their issuance and trading are allowed under the regulatory sandbox programme.

The FSC has designated the projects of six companies as part of the regulatory sandbox programme and granted exemptions from regulations under the FISCMA and the Personal Information Protection Act (the “PIPA”), specifically in connection with the issuing and trading of tokenised real estate trust beneficiary securities. These companies applied for an exemption from the FISCMA regulations that apply to investment brokerage for securities and the opening of securities exchanges in order to operate trading platform services for tokens issued based on real estate trust beneficiary securities.

The FSC’s approval implies that for security token offerings (STOs), such as issuance of tokens representing real estate trust beneficiary securities, restrictions under the FISCMA apply, unless otherwise approved as a regulatory sandbox by the authorities.

In February 2023, the FSC announced a plan to revise the regulatory framework on the securities-type token issuance and distribution (the “STO Guideline”) and that it is intending to amend the FISCMA to permit STOs in compliance with laws and regulations. In July 2023, the amendment bill for the FISCMA and amendment bill for the AERSB were introduced to permit STO issuance and distribution to a certain extent. According to the amendment bills prepared by the FSC, tokenised securities mean securities that are electronically registered in an account book that is in a distributed ledger form. A distributed ledger is defined as a ledger and its management system in which information about securities is jointly recorded in chronological order by multiple participants and is protected from unauthorised deletion and subsequent alteration through joint management and technical measures.

The government had intended to finalise the amendments to the relevant pieces of legislation in 2023 to allow a one-year preparation period before permitting STOs by the end of 2024 but the amendment bills were not passed. The relevant STOs-related amendment bills were again proposed in March 2025 but no substantive discussion has taken place.

There are no specific rules or restrictions that regulate stablecoins. As stated in 2.2 Categorisation, stablecoins may constitute securities under the FISCMA or electronic prepayment means or electronic currency business under the EFTA, depending on their structure and nature.

The Korean Prosecutors’ Office brought criminal lawsuits against several key people involved in the Terra Project on the grounds that Luna may be considered securities under the FISCMA and they are on criminal trial. This seems to have affected the Korean regulators’ negative and inactive stance towards stablecoin in general. The FSC has publicly stated that it views stablecoins as different from other digital assets in terms of their potential effect on financial stability due to the possibility of their rapid proliferation and ability to combine with various financial services.

The Bank of Korea has opined that it views stablecoins as having the potential to provide stable value and benefits, such as cost reduction and financial inclusion compared to other existing digital assets. However, due to the fact that the existing regulatory and supervisory system is only effective to a limited extent in appropriately dealing with the potential risks, there is a great need to implement appropriate regulations such as greater transparency of stablecoin issuers and the sufficient provision of information for any risk assessment.

Following on from the enactment of the VAUPA, the financial authorities have announced their intention to establish a more comprehensive regulatory framework in the coming phase of new virtual asset legislation in the second half of this year (Phase 2). The Phase 2 legislation will include regulations related to stablecoins as well. According to press releases issued by the FSC, Phase 2 is expected to include requirements for stringent reserve asset management obligations on stablecoin issuers and explicitly guarantee the redemption right of users.

Another important issue is whether regulations will differentiate between stablecoins issued overseas and pegged to foreign currencies such as the US dollar and stablecoins issued domestically and pegged to the Korean won. It is therefore necessary to closely monitor the direction and progress of institutionalisation and legislation of stablecoins.

The VAUPA defines the scope of "virtual assets" subject to regulation and excludes NFTs from its regulatory remit. Under the Enforcement Decree, NFTs excluded from the definition of virtual assets are characterized as "electronic certificates that exist uniquely and are non-interchangeable among parties, such as those primarily collected for their own value or used solely to confirm transactions between parties”. In addition, the Supervisory Regulations on Virtual Asset Businesses clarify that NFTs capable of being used as a means of payment for specific goods or services are not excluded from the definition of virtual assets.

On 10 June 2024, the FSC issued the Guidelines and Q&A on the Determination of NFTs as Virtual Assets (the "FSC NFT Guidelines"), providing specific criteria for assessing whether an NFT qualifies as a virtual asset. According to the FSC NFT Guidelines, an NFT is likely to be deemed a virtual asset if it:

• is issued in large quantities or mass series with a high degree of interchangeability;
• is divisible, thereby significantly weakening its uniqueness;
• can be used, directly or indirectly, as a means of payment for specific goods or services; or
• can be exchanged for virtual assets among unspecified persons or linked to the payment for goods or services through other virtual assets.

Conversely, an NFT is unlikely to be classified as a virtual asset if it:

• primarily serves a purpose other than economic value;
• has minimal economic function in terms of use or application; or
• cannot reasonably be regarded as an electronic certificate capable of transfer or transaction (eg, where secondary trading is not possible).

There are no regulations prohibiting the use of digital assets as electronic payment means under the EFTA. However, it is known that the FSC conducted an internal review and concluded that “virtual assets cannot be considered electronic prepayment means due to their constantly fluctuating value”. It therefore seems it will be challenging for most digital assets to qualify as electronic payment means under the EFTA.

Separately, there had been cases under the EFTA where digital assets were used as payment instruments in exchange for provision of services or sales of goods. The structure involved the payment gateway service provider (“PG”) purchasing tokens that customers paid as payment means from stores and sold these tokens to other merchants to settle payments. The issue was whether the PG’s sale of its own token for Korean won was perceived as a virtual asset service that was subject to registration requirements under the AML Act. The FSC regarded the sale as a token to Korean won sale and therefore required the use of verified real-name bank accounts. However, banks refused to open a verified real-name bank account for the PG and the PG was forced to terminate its service.

Furthermore, under the Special Act on Regulation-Free Zones and Regional Specialised Development Zones, the Busan Blockchain Regulation-Free Zone is designated as a regulation-free zone and payment and settlement using stablecoins (digital vouchers) are recognised as an exception. Two blockchain projects were approved in November 2024 and the designation period for the special zone was extended by three years until 2027 to enable the continued expansion of these innovation initiatives.

There is currently no legislation that specifically governs the method for creating security interests over virtual assets or the procedures for enforcing these security interests. Under the principles in the Civil Act, it is difficult to classify virtual assets as existing type of property rights, such as real rights or claims. It is also therefore challenging to directly apply the provisions relating to compulsory enforcement of property rights with regards to virtual assets.

However, in practice, when virtual assets are provided as collateral, enforcement is generally carried out through the automatic transfer of the pledged virtual assets to the collateral taker via smart contracts upon the occurrence of an enforcement event. As a result, compulsory enforcement procedures of virtual assets are rarely necessary.

Korean law does not clearly define smart contracts. However, they can qualify as regular contracts under the Civil Act if they meet the standard contractual elements of offer, acceptance and mutual consensus. Under the Civil Act, a contract becomes legally binding when an offer is made by one party and accepted by the other party. Smart contracts could be treated similarly and be enforceable if concluded validly. However, unlike the conventional concept of contracts, it is debatable what constitutes offer and acceptance in smart contracts.

Given that the performance of a smart contract is automatically executed upon the conclusion of the agreement, legal questions arise as to whether a smart contract can be nullified or rescinded in the same manner as a conventional contract when grounds for invalidity or rescission exist. No court precedent has specifically addressed this issue to date.

However, the Framework Act on Electronic Documents and Transactions defines an “electronic transaction” as a transaction conducted fully or partially by electronic documents when buying and selling goods or services. Given this, smart contracts, which process transactions electronically, are likely to be included within this definition.

The FSC does not currently accept applications for collective investment schemes (ie, funds whether in the form of corporation or trust) investing into virtual assets under the FISCMA. Additionally, the foreign exchange reports submitted for investments in overseas investment funds involving virtual assets, as required under the foreign exchange regulations, are not accepted by the relevant bodies. Regulated firms and funds with exposure to digital assets are therefore not generally permitted.

Additionally, the FSC has taken the position that it will not allow asset managers to create Bitcoin spot ETFs in Korea. The FSC specifically prohibits the issuance of spot Bitcoin ETFs and the brokerage of overseas spot Bitcoin ETFs because these activities could be deemed inconsistent with the government’s established position and may violate the FSCMA, while permitting overseas Bitcoin futures ETFs.

According to the SASFI, when a service is designated as an innovative financial service, businesses are exempted from certain regulations related to licensing, registration, reporting, corporate governance, business scope, soundness, business conduct and supervision and inspection of the business or business operator in the applicable financial-related laws as specified by the SASFI. An innovative financial service refers to any financial service recognised as being distinct from existing financial services in terms of details, methods, forms of service delivery or services provided in the course of conducting business related to these financial services. This regulatory scheme is commonly referred to as the financial regulatory sandbox programme.

A few businesses have been designated as innovative financial services in relation to the FISCMA for the financial regulatory sandbox programme. These services include real estate beneficiary securities token issuance and trading by trust companies and trading platform and blockchain-based trading and distribution service of trust beneficiary securities linked to aircraft engines.

Additionally, under the Special Act on Regulation-Free Zones and Regional Specialised Development Zones, the Busan Blockchain Regulation-Free Zone has been designated as a regulation-free zone to benefit from various regulatory exemptions. A real estate fund beneficiary securities token issuance and trading platform has been designated as a regulatory sandbox in the Busan Blockchain Regulation-Free Zone.

In response to the Financial Action Task Force 2019 Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers, the AML Act was amended by the National Assembly on 25 March 2020, with an effective date of 25 March 2021. Please see 4.1.4 Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Requirements for details.

The Bank of Korea and several Korean commercial banks have participated in the Agora project led by the Institute of International Finance (the “IIF”) and the Bank for International Settlements (the “BIS”) in which seven countries are collaborating to develop a prototype CBDC and remitting the CBDC to other countries.

In November 2023, the International Organisation of Securities Commissions (the “IOSCO”) issued its Final Report on Policy Recommendations for Crypto and Digital Asset Markets. The Final Report includes various recommendations, such as requiring VASPs to establish governance structures that can address conflicts of interest and appropriately disclose criteria for the listing and delisting of virtual assets. Given that the FSC and the Financial Supervisory Service (the “FSS”) are both IOSCO members, these recommendations are expected to serve as important guidelines for Korea’s regulatory approach.

With the VAUPA coming into effect from July 2024, the primary supervisory authorities over virtual assets have become the FSC and, by delegation, the FSS. The FSS is specifically responsible for inspecting VASPs and to monitor their compliance with user protection obligations. Meanwhile, the FSC, based on the inspection results, may impose sanctions such as corrective orders, partial or complete suspension of business or administrative fines against VASPs found to be in violation.

However, the authority over VASP registration and anti-money laundering compliance remains with the FIU under the AML Act.

The Ministry of Economy and Finance (the “MOEF”) and the Bank of Korea oversee the application of regulations related to foreign exchange transactions. Specific cross-border transactions involving digital assets, particularly those classified as securities or means of payment, may require reporting to the Bank of Korea or to authorised foreign exchange banks. It is generally understood that these regulatory authorities maintain strict and conservative positions regarding digital assets, often resulting in the non-acceptance of the reporting. The Ministry of Science and ICT (the “MOSICT”) is responsible for the general regulation and promotion of blockchain technology. Given its mandate to support the blockchain industry and technology, the MOSICT typically adopts a supportive and encouraging stance towards the development of blockchain initiatives. The Korea Internet & Security Agency (the “KISA”), which has been delegated specific execution responsibilities by the MOSICT, similarly implements policies and regulations that aim to promote the blockchain sector.

Self-regulatory activities are voluntarily conducted by industry participants through the DAXA, the Korea Blockchain Industry Promotion Association, the Virtual Asset Finance Association, the Open Blockchain Industry Association, the Open Blockchain and Decentralised Identifier Association, the Korea NFT Contents Association and the Korea NFT Association, none of which have any legal basis for establishment. The self-regulations purported by these organisations therefore have no legal enforceability or binding effect. With the recent increase in fintech companies entering the virtual asset sector, the Korean Fintech Industry Association has also started actively participating in legislative activities relating to virtual assets.

The DAXA was formed by the five major Korean virtual asset exchanges (GOPAX, BITHUMB, UPBIT, COBIT, KORBIT, and COINONE). These five have opened up real-name Korean won-denominated bank accounts with Korean banks. The DAXA is the most engaged and active in showing self-regulatory efforts. For example, it has established self-regulatory rules regarding listing review standards and marketing practices, which are publicly available on its official website.

Following the enactment of the VAUPA, the Virtual Asset Committee was established and it reports to the FSC. The Virtual Asset Committee is primarily tasked with advising on policies and systems related to the virtual asset market and service providers. It is composed of public officials from key departments overseeing virtual assets, as well as industry experts and is expected to serve as a platform for comprehensive public-private sector dialogue. The first meeting of the Virtual Asset Committee was held on 1 November 2024. The discussions included whether or not to allow corporations to become customers of virtual asset exchanges and the institutionalisation of stablecoins. The future role and influence of the Committee remains unclear.

South Korea is not a common law jurisdiction. The following court cases illustrate some meaningful insights on how virtual asset-related regulations are interpreted.

"Conducting Business to Qualify as a Virtual Asset Service Provider” (Supreme Court Decision 2024Do10710, 12 December 2024)

The Supreme Court held that, when determining whether a person qualifies as a VASP, it must be assessed whether the person engages in virtual asset transactions continuously and repeatedly for profit. This determination should be made by comprehensively considering factors such as the purpose, type, scale, frequency, duration and manner of the virtual asset transactions on a case-by-case basis.

The Supreme Court specifically stated that users of a virtual asset exchange who trade or exchange virtual assets solely for their own account and for its own benefit would, in the absence of special circumstances, not typically be regarded as conducting a business as a VASP. In contrast, a person who engages in virtual asset transactions for the benefit of an unspecified number of other users and receives consideration as a result on a continuous and repeated basis will in principle qualify as a VASP.

In this case, the defendant and accomplices repeatedly engaged in arbitrage transactions by purchasing virtual assets on a Japanese exchange with funds collected from unspecified persons in Japan and then sold the virtual assets on a Korean exchange and received a fee proportional to the transaction amount. The Supreme Court found that the defendant was conducting virtual asset trading as a business for the benefit of an unspecified number of persons and receiving fees. It should therefore be considered a VASP.

“Liability of a Virtual Asset Exchange for Users when Delisting a Specific Token” (Seoul Central District Court Decision 2022Gahap519467, 18 April 2024)

This case involved a situation where a virtual asset exchange had listed a token issued by a foreign company and subsequently delisted it after discovering that its actual circulation volume differed from the disclosed planned circulation and a user of the exchange, who had traded the token prior to delisting, filed a claim for damages, alleging that the exchange had breached its investor protection obligations.

The lower court dismissed the user’s claim, finding that the exchange did not violate its investor protection obligations during the listing or delisting process. The court stated that, while a virtual asset exchange has a duty to protect investors by, in good faith, selecting tokens for listing and delisting and informing users of the appropriateness of trading listed tokens, the decisions on whether a token is listed or delisted are in principle fundamentally subject to the exchange’s own standards and polices, which should be respected.

Since the introduction of the requirement for VASPs to register under the AML Act, the FIU has consistently pursued enforcement actions against unregistered overseas VASPs. For example, in 2022, the FIU filed a criminal complaint with investigative authorities against certain unregistered overseas VASPs. In March 2025, the FIU also requested Google Play Store block access to the mobile applications of these unregistered VASPs. The FIU clarified that even overseas VASPs may fall within the scope of the AML Act if they are deemed to be targeting the Korean market, for example by providing Korean-language websites, conducting marketing activities directed at Korean users or supporting Korean won payment services.

In addition, the AML Act prohibits registered VASPs from engaging in transactions with unregistered VASPs. A Korean virtual asset exchange was recently sanctioned by the financial supervisory authorities with a partial suspension of business operations for approximately three months. The sanction specifically restricted the transfer of virtual assets for newly onboarded customers of the exchange for violating this prohibition by transacting with unregistered overseas VASPs. The sanctioned exchange has filed an administrative lawsuit seeking to overturn the regulatory measure and the outcome of the court proceedings remains to be seen.

The tax authorities in Korea have actively and widely interpreted the existing tax laws to impose taxes on digital assets. Consequently, numerous disputes have arisen regarding the legality of taxation under current laws such as the Inheritance and Gift Tax Act and the Value Added Tax Act and many of the disputes are still ongoing.

The tax authorities have recently stated that transactions in which digital asset-issuing entities who provide digital assets for free to users who use specific services or meet certain conditions (such as “staking”, “hard forks” and “airdrops”) are generally subject to gift tax. In terms of VAT, it was interpreted that the supply of digital assets that are mined by a business and sold on exchanges are not subject to VAT.

Meanwhile, the Income Tax Act and the Corporate Tax Act have recently been amended to include explicit provisions regarding digital assets. Under the amended Income Tax Act, income earned by individuals by transferring or lending digital assets will be captured as “other income” under the Act and will therefore be subject to income tax.

The amended Corporate Tax Act now clearly stipulates that income from digital assets is taxable for domestic corporations and it is clear that digital assets are included in domestic source income for foreign corporations with domestic business establishments. The criteria for determining whether income from digital assets constitutes “domestic source income” under the Income Tax Act and the Corporate Tax Act has not yet been clearly established.

However, since the amendments to the Acts were passed and following the postponement of the imposition of income tax for profits earned from the transfer of digital assets, it was recently decided that the effective date for the imposition of this tax be delayed from January 2025 to January 2027.

In Korea, ESG and sustainability requirements-related regulations regarding virtual asset activities, such as mining, have not been introduced. While there have been news reports about the negative environmental impact of Bitcoin mining due to its significant energy consumption and greenhouse gas emission, there has not been sufficient drive for any legislative interventions to address it. Nor have there been any policy discussions about it.

Personal information refers to information about a specific individual that can identify the individual by itself or is information that can easily be combined with other information to identify a specific individual (Article 2 of the PIPA). If information that meets these criteria is stored and processed on a blockchain, the storage and processing may be subject to regulation under the PIPA, even when the information is processed in an encrypted manner.

For example, to protect the right of a data subject (eg, an individual) to be forgotten, the PIPA stipulates that personal information must be promptly “destroyed” when it is no longer necessary for the purpose of processing or when there is a deletion request from the data subject. For this purpose, “destroyed” refers to a method of permanently deleting the relevant personal information so that it cannot be restored or regenerated.

However, owing to the nature of the technology, the information stored in a blockchain is permanent and concerns about whether the services using blockchain technologies are in violation of these regulations under the PIPA are therefore raised. To address these concerns, the government has therefore revised the enforcement decree of the PIPA to permit anonymisation of personal information as a method of “destroying” in addition to permanent deletion.

By anonymisation, the data subject should not be able to be easily identified when combined with other information. How easily a data subject can be identified will be determined by reasonably considering the time, cost and technology required.