Over the past eight years, South Korea's stance on crypto assets has been in a delicate state of division.
On one hand, it possesses one of the world's most active and emotionally charged crypto trading markets. With a high density of retail investors and fast trading frequency, new narratives are almost always amplified in the South Korean market as soon as they emerge. On the other hand, at the institutional level, listed companies and professional institutions have long been explicitly barred from participating—they are not allowed to hold, allocate, or even include crypto assets in their balance sheets.
Thus, a long-standing but rarely acknowledged structural contradiction has gradually taken shape: the market has long matured, but the institutional framework has remained absent.
On January 12, this contradiction was officially broken by the authorities. The Financial Services Commission (FSC) of South Korea formally approved: listed companies and professional investors can now allocate up to 5% of their equity annually to crypto assets ranked in the top 20 by market capitalization.
This marks the official end of the de facto ban on institutional participation in the crypto market since 2017.
Institutional Relaxation
If we look only at the proportion, this policy is not radical; the real change lies in "who is allowed to enter."
Over the past few years, the keywords repeatedly emphasized by South Korean regulators have always been only two—investor protection and systemic risk. This time, however, the regulators did not choose a full liberalization but instead set very clear boundaries:
- Limited to listed companies and professional investors (approximately 3,500 entities, including listed companies and registered professional investment institutions, have gained market access)
- Limited to mainstream crypto assets ranked in the top 20 by market capitalization
- Allocation cap set at 5% of equity
This is not about encouraging risk appetite but about addressing a more practical issue: when crypto assets have become a significant asset class at the societal level, continuing to exclude all institutions across the board is itself creating new risks.
The "relaxation" of the institutional stance is not a shift toward radicalism but a long-overdue rational correction.
The Cost of Outflow
This change did not happen suddenly, nor did it stem from a shift in ideology; it was repeatedly pushed forward by reality.
By 2025, South Korean investors had transferred over 160 trillion won (approximately $1.1 trillion) to overseas cryptocurrency trading platforms.
Against the backdrop of regulatory delays, crypto assets have de facto become one of the primary investment assets in South Korea, with nearly 10 million investors. However, trading activities are increasingly occurring outside the purview of the institutional framework.
The consequences are not complicated but starkly real:
- Stagnant growth of domestic trading platforms
- Investors forced to turn to overseas platforms like Binance and Bybit
- Both risks and capital flowing abroad, with regulators struggling to cover them
Under such a structure, maintaining the "institutional ban" is no longer prudent but rather amplifies systemic vulnerabilities. Now, with the reopening of domestic compliant channels, this portion of forced outflows has, for the first time, seen the possibility of returning.
From "Blocking" to "Channeling"
More notably, this is not an isolated policy adjustment.
Recently, the South Korean Ministry of Finance has explicitly stated that it will promote the launch of digital asset spot ETFs. From discussions on stablecoins to allowing institutional holdings, and further to the deployment of standardized investment tools, the regulatory logic is undergoing a clear transformation.
When listed companies are allowed to directly allocate crypto assets, and the market is simultaneously preparing compliant, regulated, and clearable financial products, the signal is already very clear: what regulators truly care about is no longer "whether to let institutions in" but "how to keep institutions within the system."
This means that South Korea is building a complete path for institutional participation: from direct holdings to standardized products, and further to compliant trading and clearing systems, rather than dealing with scattered, passive case-by-case approvals.
What has truly changed is not South Korea's attitude toward crypto assets but the regulators' eventual acknowledgment: this market can no longer be excluded from the institutional framework.
As listed companies, professional institutions, and compliant investment channels begin to align simultaneously, the role of crypto assets in South Korea is also changing—it is no longer just a passively tolerated gray market but has been formally incorporated into the financial system as an asset class that can be managed, constrained, and must be taken seriously.
This step did not come early, but at least, it has finally begun.
*This content is for reference only and does not constitute investment advice. The market carries risks, and investment requires caution.
