The South Korean Financial Services Commission (FSC) has announced a significant shift in its regulatory framework, aiming to finalize the Digital Assets Basic Act (Phase 2) within the current year. Kim Sung-jin, head of the Virtual Assets Division at the FSC, confirmed during a parliamentary meeting that the government is accelerating legislation to regulate stablecoins while simultaneously facilitating the entry of institutional investors into the digital asset market. This move signals a departure from years of restrictive oversight, potentially reshaping the landscape for domestic financial institutions and the broader blockchain ecosystem.
Lifting the Nine-Year Ban on Institutional Equity
One of the most consequential aspects of the proposed legislation is the removal of a long-standing prohibition that has prevented financial companies from holding equity in cryptocurrency firms. Since 2017, administrative guidance has effectively barred banks and securities providers from direct involvement in the sector. If the new legislative phase is realized, this nine-year-old ban will be lifted, allowing traditional financial entities to invest in and own stakes in virtual asset service providers (VASPs).
- Banks and securities firms will be permitted to hold equity in crypto-related enterprises.
- The FSC aims to harmonize local regulations with international standards, specifically referencing European Union (EU) practices.
- Entry requirements for financial institutions will be simplified for business areas that perform functions similar to traditional finance.
Institutional Infrastructure and OTC Trading
Beyond equity ownership, the FSC is exploring the development of professional infrastructure to support a more mature market. Director Kim revealed that the commission is studying the introduction of institutional brokers and over-the-counter (OTC) trading intermediaries. These roles would mirror the structure of traditional stock markets, providing a more secure and regulated environment for large-scale transactions. The implementation of regulated OTC desks is expected to reduce price slippage and improve liquidity for institutional participants.
The government's approach focuses on several key areas of market development:
- Establishment of formal brokerage systems for virtual assets.
- Regulation of OTC intermediaries to enhance transparency in large-volume trades.
- Acceleration of stablecoin-specific rules to ensure monetary stability.
The FSC’s commitment to completing this legislative framework by the end of 2026 reflects South Korea's intent to integrate digital assets into the formal economy. By bridging the gap between traditional finance and the blockchain industry, the authorities aim to provide a clearer legal path for corporate participation. As the FSC continues to refine the entry requirements and oversight mechanisms, the South Korean market may see a substantial influx of institutional capital, further legitimizing virtual assets as a recognized asset class within the national financial system.
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