SOUTH KOREA Law and Practice Contributed by: Wooyoung Choi, Suhhee Han, Seonghwan Ju and Matt Younghoon Mok, Lee & Ko
KLAYswap Hack (2022) In 2022, approximately KRW2.2 billion worth of virtual assets were stolen through a hacking incident involv- ing KLAYswap, a DeFi service developed by Ozys. KLAYswap subsequently announced full compensa- tion for affected users, and no separate regulatory sanctions or criminal prosecutions in connection with the incident have been identified. Orbit Bridge Hack (2024) In 2024, approximately USD82 million worth of vir- tual assets were stolen through a hacking incident involving Orbit Bridge, a cross-chain service devel- oped by Ozys. In connection with the incident, Ozys filed a damages claim against its Chief Information Security Officer (CISO), who had been responsible for establishing and managing the company’s information security system. However, the court dismissed the claim, finding insufficient evidence that the CISO had engaged in unlawful conduct that lowered the level of security or caused the incident. Separately, in civil claims brought by users, the court reportedly recog- nised Ozys’s liability for damages to a certain extent. In individual transactions, it would generally be per- missible for the parties to agree on settlement using virtual assets as consideration on a case-by-case basis. However, virtual assets are not typically eligible to be issued as electronic payment instruments or electron- ic money under the EFTA. The Act on the Protection of Virtual Asset Users excludes electronic payment instruments and electronic money from the defini- tion of virtual assets, and in practice, the FSS has not approved licensing for issuance or management businesses that attempt to structure virtual assets as prepaid electronic payment instruments. 6. Payments and Stablecoins 6.1 Payments Meanwhile, even if a payment service involving virtual assets is operated, if the business involves activities such as trading, custody, management, brokerage, intermediation, or agency services on a commercial basis, a VASP registration may be required. In this
context, where a company issues a virtual asset and enables users to use it for purchases at merchants through an affiliated settlement network, the affiliated company that circulates or facilitates the use of such virtual asset in settlement may also be required to reg- ister as a VASP. In addition, where virtual assets are used for cross- border payments or settlement of import/export transactions, the Foreign Exchange Transactions Act applies, and unreported cross-border payments may constitute a violation of foreign exchange regulations. Notably, legislation amending the Foreign Exchange Transactions Act to require VASPs engaged in cross- border virtual asset transfers to register under the Act was passed by the National Assembly on 7 May 2026. Accordingly, future changes to reporting and registra- tion obligations should be closely monitored. 6.2 Stablecoins 6.2.1 Fiat Currency and Algorithmic Stablecoins There is currently no statutory definition of stablecoins or a classification framework for different types of sta- blecoins under Korean law, as dedicated regulations on stablecoins have not yet been fully established. However, certain case law has provided interpretative distinctions. In particular, a decision of the Seoul Cen- tral District Court (Seoul Central District Court Deci- sion No 2023Gahap85022 dated 22 January 2025) classified: • fiat-collateralised stablecoins as those maintaining value by holding reserve assets such as legal cur- rency, bank deposits, and traditional securities (eg, government bonds, corporate bonds, and com- mercial paper); and • algorithmic stablecoins as those maintaining price stability through programmed supply adjustment mechanisms. At present, the institutionalisation of stablecoins in Korea is actively being discussed, and multiple legis- lative proposals have been submitted to the National Assembly’s Strategy and Finance Committee, includ- ing bills proposed by members of the National Assem- bly Min Byung-deok, Lee Kang-il, Kim Jae-seop, and Choi Bo-yoon.
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