SOUTH KOREA Trends and Developments Contributed by: Wooyoung Choi, Suhhee Han, Seonghwan Ju and Matt Younghoon Mok, Lee & Ko
advising on corporate matters, including M&A, joint ventures and other transactional work. He is admitted to practice in the District of Columbia.
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Korea’s Evolving Fintech Landscape: Digital Assets, AI Regulation and Financial Services Reform Introduction This article provides an overview of the latest regu - latory developments in Korea’s digital assets, digital finance (fintech) and artificial intelligence (AI) sectors, addressing six principal issues: (1) Phase 2 digital asset legislation introducing a comprehensive regu - latory framework and stablecoin institutionalisation; (2) security token offering (STO) legislation follow - ing the National Assembly’s passage of an STO bill on 9 December 2025; (3) the Framework Act on AI Development and Establishment of a Foundation for Trustworthiness (the “AI Framework Act”), which entered into force on 22 January 2026; (4) reforms to network separation requirements to facilitate AI and SaaS adoption in financial services; (5) strengthening of electronic financial services regulations in response to the “TMON-WeMakePrice” settlement fund crisis; and (6) third-party risk management guidelines for financial institutions. Outlook for Phase 2 digital asset legislation Overview Korea’s digital asset market stands at a significant turning point. The Act on the Protection of Virtual Asset Users (the “VAUPA”), which entered into force in July 2024, constituted Phase 1 legislation, provid -
ing a “minimum safeguard” to regulate market mis - conduct and protect user assets. The “Digital Asset Basic Act” currently under discussion in the National Assembly is expected to constitute Phase 2 legisla - tion, clarifying the regulatory framework and providing comprehensive regulation without gaps, drawing on overseas legislative examples such as MiCA. Multiple bills have been submitted by Members of the National Assembly, and in the first half of 2026, the ruling Democratic Party of Korea is expected to introduce a consolidated bill. These bills address dig - ital asset issuance, disclosure regulations, distribu - tion, service provider entry requirements, stablecoin institutionalisation and unfair trading regulations. The specific content may change during legislative delib - eration. Clarification of digital asset definition Under the Digital Asset Basic Act, the terminology is expected to change from “virtual assets” to “digi - tal assets”. Bills generally define “digital assets” as “electronic tokens (including all rights thereto) pos - sessing economic value that can be electronically traded or transferred using distributed ledger tech - nology”. Game items, electronic prepayment means, electronic currency and electronically registered stock are excluded to prevent regulatory overlap with exist - ing laws.
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