SOUTH KOREA Law and Practice Contributed by: Wooyoung Choi, Suhhee Han, Seonghwan Ju and Matt Younghoon Mok, Lee & Ko
(STR). They must also segregate customers’ deposits and virtual assets from their own proprietary assets. In this regard, legislative amendments and enforce- ment decrees currently under consideration would expand the scope of the Travel Rule by abolishing the current threshold of KRW1 million, thereby broadening its application. In addition, where transactions involve overseas VASPs or private wallets, VASPs would be required to assess and manage money laundering risks and take appropriate measures based on the level of risk. Meanwhile, the Act on the Protection of Virtual Asset Users prohibits unfair trading practices involving vir- tual assets, including the use of undisclosed mate- rial information, market manipulation, and fraudulent trading. Furthermore, under the amended Act on the Preven- tion of Telecommunications-based Financial Fraud and Refund of Damages (the “Telecom Fraud Refund Act”), which is scheduled to take effect on 1 Octo- ber 2026, virtual asset exchanges will be subject to anti-scam and victim recovery obligations comparable to those imposed on traditional financial institutions. Accordingly, exchanges must continuously monitor for suspected fraudulent transactions, promptly sus- pend accounts when fraud is suspected, and support the recovery and refund of assets to victims. In addition, as noted above, Korea is preparing to enact DABA, which is expected to: • further classify digital asset businesses into categories such as trading/exchange, brokerage, custody/management, payment/transfer, discre- tionary management, advisory, order transmission, and agency services; • introduce a regulatory framework for stablecoins; and • establish additional requirements related to the issuance of digital assets. 2.3 Regulated Firms and Legal Wrappers Korean financial authorities have taken the position that brokerage of Bitcoin futures exchange-traded funds (ETFs) may be permitted, whereas issuance
and brokerage of Bitcoin spot ETFs may raise issues of violation under the FSCMA. This is because, under the FSCMA, ETFs are premised on having an eligible “underlying asset,” and virtual assets are generally not regarded as satisfying the requirements for such underlying assets. However, under the FSCMA, “collective investment” does not necessarily require a traditional underlying asset, but instead defines the investable asset as any “asset with economic value.” Accordingly, investment vehicles that invest in virtual assets may, in princi- ple, be structured as collective investment schemes under the FSCMA and become subject to its regula- tory framework. In practice, however, several legal uncertainties remain, particularly regarding whether a trust com- pany responsible for custody and management of collective investment assets is permitted to hold virtual assets directly, or whether such custody may be delegated to a VASP. Due to these uncertainties, and given that corporate acquisition of virtual assets has historically not been permitted, there have been no domestic investment funds in Korea that directly invest in virtual assets. For reference, a legislative amendment to the FSCMA has been proposed and is currently pending in the National Assembly. The Bill would explicitly include virtual assets as eligible “underlying assets” under the FSCMA and would also permit trust companies to hold virtual assets as part of their custodial asset pool. 2.4 Token Issuance Financial authorities in Korea have prohibited all forms of initial coin offerings (ICOs) since 2017. However, under the forthcoming DABA, it is expected that a regulatory framework for the issuance of digital assets will be introduced. This is likely to include entry requirements for digital asset issuers, as well as obli- gations relating to the preparation and disclosure of digital asset white papers and other related disclosure requirements.
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