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April 23, 2025
South Korea entered 2025 amidst political turbulence, heightened regulatory scrutiny, and a maturing crypto market. Following the aftermath of former President Yoon Suk Yeol's failed declaration of martial law in December 2024, authorities stepped up oversight of the digital asset sector while postponing long-debated tax plans.
In the first quarter, lawmakers, regulators, and law enforcement took action to combat market manipulation, corporate involvement, and crypto-related crime, even as retail adoption remained high.
A proposed 20% capital gains tax on cryptocurrencies was again postponed – this time to 2027. The delay, supported by lawmakers across party lines, marked the third such postponement and came amid broader economic and political concerns. Legislators cited enforcement challenges, fears of capital flight, and the altered political agenda following Yoon's removal from office as reasons.
South Korea joined the U.S. and Japan in warning of state-sponsored cyber threats targeting the crypto sector. The Lazarus Group was named in connection with several major security breaches in 2024, including attacks on WazirX in India and South Korean exchange Upbit.
The Financial Services Commission (FSC) convened its second Virtual Assets Committee meeting in January but stopped short of fully opening crypto trading to corporations. While a decision remained pending, the authority implemented new safeguards against price manipulation and committed to stricter oversight of stablecoins.
That same month, authorities initiated the first enforcement actions under the Virtual Asset User Protection Act. A trader was charged with pump-and-dump violations, while Upbit received a suspension notice for allegedly failing to meet Know Your Customer (KYC) requirements for hundreds of thousands of accounts.
Upbit and Bithumb later agreed to compensate users affected by disruptions during the martial law declaration, which had led to service outages and market volatility.
In February, the FSC unveiled a phased plan to allow corporations to trade cryptocurrencies using real-name accounts. The move is slated to begin with charities and universities, which will be permitted to sell donated digital assets later in the year. The plan is part of a broader effort to formalize institutional involvement while adhering to Anti-Money Laundering (AML) and KYC regulations.
Law enforcement officials re-arrested Park, a repeat offender accused of running a fraudulent token scheme involving Artube (ATT) that allegedly netted around $48 million through market manipulation.
Later in the month, the Financial Intelligence Unit (FIU) issued a partial suspension against Upbit operator Dunamu, citing compliance issues related to KYC and dealings with unregistered overseas platforms. Dunamu has since filed a lawsuit to challenge the decision. A March court ruling allowed the exchange to resume onboarding new users while the case is reviewed.
Meanwhile, the prosecution service formally established a permanent crypto crime task force after operating as a temporary unit for 20 months. Since mid-2023, the unit, comprised of prosecutors, regulators, and specialists, has filed over 70 indictments and secured nearly $500 million in illicit proceeds.
South Korean financial authorities have begun reviewing legal options for approving spot Bitcoin exchange-traded funds (ETFs), signaling a potential policy shift. The review comes amid growing demand from local brokers and follows the U.S. Securities and Exchange Commission (SEC)’s approval of similar products.
In March, regulators compiled a list of unlicensed overseas crypto exchanges and took steps to restrict access, including asking app stores to delist their apps. Google removed 17 apps from its store, and Apple later followed suit. The FIU warned that platforms operating without a license could face legal consequences.
By the end of the first quarter, the number of crypto accounts in South Korea exceeded 16 million – more than a third of the population and higher than the number of domestic stock traders. Despite the growth in users, trading activity declined sharply. Upbit's quarterly volume dropped by over 30%, according to CoinGecko.
With a snap presidential election scheduled for June, cryptocurrency is expected to remain a key campaign issue. Former prosecutor and current candidate Hong Joon-pyo recently pledged to bring South Korean crypto regulations more in line with the U.S. approach. However, his familiarity with digital assets was questioned after he admitted to not knowing what a central bank digital currency (CBDC) is.
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