Crypto Expansion Stalls In South Korea After VASP Approvals Take A Hit

South Korea’s push to grow crypto services hit a hard pause last year, as regulators moved slowly and approvals dried up. Trading and custody firms found themselves waiting longer. Investors and startups are watching closely.

South Korea: Approvals Drop Sharply

Based on reports, the Financial Intelligence Unit approved only two new Virtual Asset Service Providers in 2025. The firms cleared were Happy Block, for exchange services, and Blosafe, for transfer and custody. Approval times lengthened too — the average rose from 11 months in 2024 to about 16 months in 2025. Some applicants endured waits of more than 600 days.

Inspections And Penalties Increase

Regulators have tightened checks on existing operators. Upbit’s parent, Dunamu, was hit with a fine of 35.2 billion won after authorities flagged anti-money laundering lapses. Other big names such as Korbit, Bithumb, Coinone and Gopax have faced warnings or sanctions in recent months. Reports have disclosed suspicious transaction filings totaling roughly 9.56 trillion won since 2021, a figure that regulators cite when explaining their tougher stance.

Joint ventures and bank-linked projects are not immune. Bit Korea, a planned tie-up with Hana Bank, is still waiting for clearance and cannot begin operations until it gets the green light. That blockage keeps several services off the market and delays plans that would have broadened options for ordinary users.

Regulatory Changes And Legal Delays

Lawmakers have debated a wider Digital Asset Basic Act meant to set clearer rules for stablecoins, custody and market conduct. That law is now delayed until 2026, which leaves many questions unresolved. At the same time, travel rule requirements and tighter identity checks have been expanded to close loopholes on small transfers. The result: paperwork is heavier and compliance costs are higher for firms seeking approval.

Seoul, South Korea. Image: Cosmopolitan Magazine/Sungjin Kim

South Korea: Market Effects And Business Choices

Fewer new VASPs and slower approvals can push entrepreneurs to look outside Korea for faster onboarding and lighter red tape. Some existing platforms appear to be slowing product launches while they focus on meeting the stronger rules. Based on reports, this has also put pressure on competition — potential entrants have postponed or shelved plans because of the uncertain timeline and higher operating costs.

Industry groups argue that stricter oversight will reduce crime and protect consumers. Regulators say they want safer markets. Both views matter. With only two approvals in 2025 and key legislation postponed to 2026, the market’s next moves will depend on how quickly rules are clarified and how firms adapt to heavier compliance demands.

Featured image from Unsplash, chart from TradingView