SOUTH KOREA Law and Practice Contributed by: Wooyoung Choi, Suhhee Han, Seonghwan Ju and Matt Younghoon Mok, Lee & Ko
cal substance and therefore do not qualify as “prop- erty” under the Korean Criminal Act, which requires tangible objects or manageable forms of energy. Nev- ertheless, the Court recognised that virtual assets fall within the scope of “assets” subject to confiscation under the Act on Regulation and Punishment of Crimi- nal Proceeds Concealment, thereby acknowledging them as intangible assets with economic value. This means that while virtual assets may be protected as proprietary interests, they are not recognised as “property” for purposes of crimes such as theft or embezzlement. Lower civil courts have likewise generally denied the characterisation of virtual assets as objects under civil law. For example, in a case involving a claim for the return of Bitcoin, the Seoul High Court expressly held that Bitcoin constitutes merely digital information and therefore does not qualify as tangible property under the Korean Civil Act. Accordingly, the court denied the existence of a typical deposit contract under the Civil Act, while recognising the existence of an atypi- cal contract analogous to a deposit arrangement. In this manner, although Korean courts formally reject the notion that virtual assets constitute civil-law “tan- gible property”, they have in practice treated them similarly to claims for fungible goods – for example, by ordering parties to “deliver Bitcoin” or recognis- ing substitute monetary claims where specific perfor- mance is impossible. 1.2.2 Access to Banking A VASP that does not engage in exchanges between virtual assets and fiat currency is not required to obtain a real-name verified deposit and withdrawal account. However, where a VASP engages in exchanges between virtual assets and fiat currency, it must obtain a real-name verified account from a bank pursuant to Article 7 (3)(ii) of the Act on Reporting and Using Specified Financial Transaction Information. In prac- tice, the industry currently follows the so-called one bank, one exchange principle, under which a single virtual asset exchange may obtain a real-name verified account arrangement from only one bank. A bank intending to provide such real-name verified accounts must establish and operate procedures and internal guidelines for identifying, analysing, and
evaluating the risks of money laundering and terror- ist financing associated with financial transactions involving VASPs. In addition, the bank must maintain information technology systems capable of facilitat- ing the provision of real-name verified accounts and monitoring and identifying money laundering and ter- rorist financing risks associated with such accounts. In addition, Korean financial authorities had histori- cally restricted the issuance of corporate real-name accounts for virtual asset transactions by financial institutions and corporations. Recently, however, the authorities announced that such participation would be gradually permitted to the extent that it does not undermine user protection or market stability in the virtual asset market. As a result, corporate accounts for cash-out purposes are currently permitted for law enforcement agencies, non-profit organisations, and virtual asset exchanges, and it is expected that corpo- rate accounts for virtual asset transactions by profes- sional investors (such as listed companies) and gen- eral corporations will also be permitted in the future. Moreover, while the financial authorities have, since 2017, implemented the so-called separation of finance and virtual assets policy in the form of administrative guidance, restricting financial institutions from making direct investments in virtual assets or holding equity interests in VASPs, there also have been signs of a possible relaxation of such restrictions. 1.2.3 ESG/Sustainable Finance Korea currently does not impose any separate ESG disclosure or reporting obligations specifically appli- cable to VASPs or virtual assets. 1.2.4 Tax An amendment to the Korean Income Tax Act (ITA) and Corporate Tax Act (CTA), introducing taxation on income arising from the transfer or lending of virtual assets, is scheduled to take effect on 1 January 2027. Accordingly, for resident taxpayers, virtual asset income is calculated as the consideration received from the transfer or lending of virtual assets minus the actual acquisition cost of the transferred assets and related expenses (Article 37 (1)(iii) of the ITA). However, if the total virtual asset income for the taxable period does not exceed KRW2.5 million (the basic exemp-
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