With robust consumer involvement and participation from crypto whales, South Korea’s sector was booming. However, the year 2025 brought a politically heavy gale with it. Politically, the nation was already suffering from the economic and diplomatic consequences of former president Yoon Suk Yeol’s impeachment in December 2024, which opened a new floodgate towards more stringent digital asset regulations, even as previously set tax measures faced further delays.
Scrutiny Year: Scrutinizing for Crime and Market Manipulation
During the first quarter of 2025, South Korean legislators, market regulators, and even law enforcement have come together to tackle some of the biggest unresolved issues, such as market manipulation and crypto-enabled crime.
Tax Relief Extended: Capital Gains Tax Delayed Again
Policymakers will rejoice as the 20% capital gains tax on cryptocurrency profits has once again been postponed, this time until 2027. Politicians from every corner of the aisle endorse this new delay, marking it as the third such one. Legislators cited a myriad of reasons for the delay, including enforcement practicality concerns, capital flight worries, and the recently seen political shifts due to the impeachment of President Yoon.
North Korean Threat: A United Front Against Cybercrime
Fulfilling the agenda along the lines of fighting international threats to crypto security, South Korea partnered with the United States and Japan in calling out sponsored cyber warfare on digital assets. The infamous Lazarus Group, believed to be from North Korea, obtained notoriety for several major security breaches in 2024, including the Indian exchange WazirX and South Korea’s Upbit.
Shape of Regulatory Action: KYC Compliance and Price Manipulation
South Korea’s key financial overseer, the Financial Services Commission (FSC), held its second Virtual Asset Committee meeting in January. As the agency awaited a decision regarding the full permit being granted for corporate crypto trading, it adopted additional measures aimed at preventing price manipulation. In addition, the FSC demonstrated its enforcement commitment by serving a suspension notice to Upbit due to alleged KYC negligence on a significant portion of their user accounts.
In any outcome, the decision was accepted by Upbit alongside other major exchanges, including Bithumb, which later resolved to reimburse users who faced service outages and market destabilization during the period of President Yoon’s martial law announcement.
The Initiation of Corporate Crypto Access: A Phased Approach
February stood out as a possible milestone for the deepening of institutional engagement with the cryptocurrency industry. The Crypto Assets Framework Law earmarked a phased approach that, with time, would permit corporate clients to remotely trade cryptocurrencies through real-name verified accounts. In the primary stage, it is anticipated that charities, alongside educational institutions such as universities, will be granted the ability to trade purchased, relocated digital assets. This strategy seeks to encourage institutional engagement while balancing stringent Anti-Money Laundering (AML) and KYC policy compliance.
Law Enforcement Intensifies: Targeting Crypto Crime
The issuance of a permanent task force dedicated exclusively to crypto crimes highlighted once again the commitment to fighting crypto-related criminal activities. This division, which was operating as a mixed unit composed of prosecutors, regulators, and tech experts, functioning over the last 20 months, was granted permanent status. Even prior to being formalized, this unit had achieved remarkable success, with over 70 active indictments and nearly $500 million in criminal proceeds being recovered.
Spot Bitcoin ETFs: A Possible Policy Shift Under Review
This week, South Korean authorities announced new rounds of internal discussions aimed at identifying legal avenues that would make it possible to list and trade spot Bitcoin exchange-traded funds (ETFs). The development comes as a change of direction from regulators as there is increasing pressure from local brokerage firms. This follows the US Securities and Exchange Commission’s (SEC) approval of identical products.
Unregistered Exchanges: A Crackdown on Illegal Platforms
Back in March, authorities went after foreign-registered digital currency exchanges that dealt in South Korea. They identified a set of these unsanctioned foreign platforms and took action to limit their use by asking app stores to take down their apps. Both Google and Apple complied with these requests and removed a total of 17 apps. The Financial Intelligence Unit (FIU) made it clear that they had warned these platforms operating without any licenses to cease that activity immediately lest they get sued.
Adoption Grows Despite Trading Volume Dip
Despite the more sane oversight and policies in place, digital currency usage in South Korea seems to be rising sharply. In the last three months of 2025, the individuals owning crypto accounts in the nation overtook 16 million—more than a third of the country’s total population, far greater than the domestic investors for shares. In any case, the number of new accounts opened was significantly higher along with static trading volume, particularly with Upbit’s quarterly volume decelerating at greater than 30%, as per data from CoinGecko.
Cryptocurrency and the Presidential Election—A Buzzworthy Topic
As the race for the presidency heats up with elections set in June, crypto continues to red-flag candidates and dominate discussions during campaigns. Former prosecutor Hong Joon-pyo, who is running for presidency, surprisingly stated his intention to bring South Korean crypto policy in sync with US standards. However, he faced criticism for his lack of knowledge on digital currencies after admitting he does not know what a central bank digital currency (CBDC) is.
Wrap-Up: An Evolving Industry Under Watch
With legislation and political turbulence, South Korea’s cryptocurrency market is experiencing rapid change along with an increasing number of users. As a nation, South Korea deals with the need to promote innovations while protecting consumers and reducing fraud at the same time. While currently the presidential election adds to unpredictability, in the long run it seems to be steering towards a deeper and well-regulated crypto market.
