SOUTH KOREA Trends and Developments Contributed by: Ohoon Kwon and Yeon Seo, Cha & Kwon Law Offices
as candidates for standalone legislation rather than as part of DABA. That option is under review and has not been adopted. Practitioners are still working on the assumption that stablecoin regulation will proceed within DABA rather than ahead of it. Even if the bill clears committee in the second half of 2026, passage within the year is far from guaran- teed. The subordinate regulations and implementation guidance, the materials that decide how authorisa- tion, white-paper disclosure and reserve rules actu- ally work, will not be in force before 2027, and most likely later. Foreign businesses whose Korean entry depends on DABA-track authorisation should now plan on a 2027 horizon at the earliest. Where the prod- uct fits within VAUPA, the existing Specified Financial Information Act regime, or the capital-markets amend- ments framework, market entry can proceed without waiting for DABA. For foreign stablecoin issuers in particular, two further questions matter. The first is whether eligibility criteria, once finalised, will require establishment of a Korean subsidiary – neither a representative office nor cross- border registration is likely to suffice. The second is whether stablecoins will also be treated as means of payment under the Foreign Exchange Transactions Act, administered by the Ministry of Economy and Finance, in which case flows into and out of Korea would attract foreign exchange reporting and inter- mediary obligations on top of digital asset regulation. The current direction of committee discussions points to both outcomes, and corporate form and reserve custody decisions made in 2026 should be taken with these in mind. The bank-versus-fintech owner- ship question will be resolved through the legislative process and is not one on which foreign issuers can, at this stage, base their plans. The First Enforcement Wave Under VAUPA VAUPA came into force on 19 July 2024. It was the first Korean statute to make market manipulation, the use of undisclosed material information and other unfair trading conduct in virtual asset markets direct- ly enforceable through both criminal and administra- tive channels. Prosecutorial output remained limited through 2025, with the first prosecutions reaching the courts in 2026.
The leading prosecution, designated by the Seoul Southern District Prosecutors’ Office as the “Number 1 Case”, began with a fast-track referral from the FSC and the FSS on 25 October 2024. The defendants were the chief executive of a virtual asset operating firm and an employee. Indicted on 3 January 2025, they were charged with manipulating the price of the listed token “ACE” between July and October 2024. The indictment alleged the use of an automated trad- ing programme to generate wash-trade volume, com- bined with false buy orders that were cancelled once execution prices began to move. Cumulative gains were assessed at approximately KRW7.1 billion. On 4 February 2026, the Seoul Southern District Court convicted the dependents, sentencing the chief exec- utive to three years’ imprisonment, a fine of KRW500 million and forfeiture of approximately KRW845 million in criminal proceeds. The co-defendant received two years’ imprisonment, suspended for three years. The court declined to order forfeiture of the full KRW7.1 billion, finding that the precise amount of unfair gain could not be established to the requisite evidentiary standard. Both sides have appealed. The Number 1 Case clarified several points for coun- sel advising virtual asset service providers (VASPs) and listed issuers in VAUPA matters. The fast-track referral channel among the FSC, the FSS and the Seoul Southern District Prosecutors’ Office is now operating as designed: the FSS compiles the referral package and sends it directly to a designated prose- cution team, with no intermediate police investigation. The gap between assessed gains of KRW7.1 billion and the KRW845 million actually forfeited points to a recurring evidentiary problem. Establishing an unfair gain to the criminal evidentiary standard requires reconstructing each manipulative transaction’s mar- ket impact, and exchange-side trade data alone is rarely sufficient. The court convicted on the basis of automated trading log evidence, confirming that programmatic trading conduct can constitute market manipulation without separate proof of intent for each individual order. Alongside the conviction, the FSS signalled a wider shift in its 2026 work plan. It identified API-driven
589 CHAMBERS.COM
Powered by FlippingBook