South Korea's Financial Services Commission has announced a plan to allow institutional investments in cryptocurrencies, starting with non-profit organizations.
The landmark plan announced by the FSC will allow institutions to invest in cryptocurrencies, marking a milestone in the adoption of digital assets in the Asian country. This regulatory change, which will begin with non-profit organizations, seeks to align South Korea with international standards and strengthen its position in the global cryptocurrency market.
Until now, South Korean regulations limited cryptocurrency trading to verified retail investors. Although institutions were not explicitly banned, banks were advised not to open corporate accounts intended for transactions with digital assets. This restriction has been a hindrance to institutional participation in the country’s crypto market, limiting its growth and liquidity. However, the FSC has decided to make a radical change in its current regulatory approach.
Local media Yonhap reported At a session held on January 7, FSC Secretary General Kwon Dae-young explained that the goal is to create a solid regulatory framework that allows companies Invest in cryptocurrencies safely and transparently.
“We need to discuss how to create listing standards, what to do with stablecoins, and how to establish rules of conduct for virtual asset exchanges.”, Kwon said.
A change of direction in South Korea's crypto regulation
The FSC's plan to open the door to corporate investment in cryptocurrencies will be implemented in phases, starting with non-profit organizations and later expanding to commercial enterprises.
With this implementation strategy, the South Korean regulator seeks to minimize the risks associated with the entry of large capital into a still developing market. In addition, the FSC plans to establish specific criteria for the quotation of cryptocurrencies and improve the self-regulation mechanisms in the industry.
One of the highlights of the new regulatory framework is the inclusion of social credit assessments for major shareholders of cryptocurrency exchanges. This measure aims to ensure integrity and transparency in the market, protecting investors from fraudulent practices or excessive risks.
Aligning with global standards
The FSC's decision comes in a global context where countries such as the United States are also moving forward in creating regulatory frameworks for cryptocurrencies. Moreover, the adoption of international standards will not only facilitate the participation of foreign entities in the South Korean market, but will also strengthen the confidence of local investors.
“We will work to align ourselves with global regulations in the virtual asset market,” Kwon Dae-young said.
This collaborative approach being taken by the regulator could help South Korea become a financial hub for cryptocurrencies in Asia, attracting investment and fostering innovation in the sector.
Towards greater stability and confidence
The FSC's decision has been received with optimism by the crypto community. Experts believe that the entry of institutions could significantly increase market liquidity and reduce the volatility of digital assets. Furthermore, this measure gives legitimacy to cryptocurrencies, which for years have been viewed with skepticism by regulators and the general public.
According to data Historically, Bitcoin remains the most widely used cryptocurrency in South Korea, followed by XRP, which has overtaken Ethereum in popularity. Institutional adoption could further boost the use of these cryptocurrencies, as well as others such as Solana.
Complementary initiatives in South Korea
In addition to considering authorizing institutional investments in cryptocurrencies, the agency is also working on the second phase of its Virtual Asset User Protection Act, which will include regulations on stablecoins and operating rules for exchanges.
Cash exchange-traded funds (ETFs) based on cryptocurrencies such as Bitcoin and Ethereum are also being considered for approval. These financial instruments have gained traction in other countries but have not yet been approved in South Korea. However, Eun-Bo Jeong, chairman of the Korea Stock Exchange, has advocated for the introduction of these financial products, arguing that they could meet the demand for innovative instruments in the country's capital markets.
Overall, the FSC announcement represents an important step in the evolution of the cryptocurrency market in the country. By allowing institutional participation, South Korea is not only opening up new investment opportunities but also laying the groundwork for a more inclusive and dynamic financial ecosystem.
