Crypto in South Korea

South Korea legalized cryptocurrency trading in 2017, but the regulatory framework has tightened significantly. The Financial Services Commission (FSC) and the Bank of Korea (BOK) are the primary regulators. The Act on Reporting and Using Specified Financial Transaction Information (amended March 2020, effective March 2021) introduced a licensing regime for virtual asset service providers (VASPs), requiring them to register with the Korea Financial Intelligence Unit (KoFIU) and obtain real-name verified bank accounts. The Act on Protection of Virtual Asset Users (effective July 2024) mandates segregation of customer assets, cold storage of at least 80% of deposits, and insurance coverage. The FSC's Guidelines on Virtual Asset Trading (2021) impose AML/KYC requirements. In 2023, the FSC issued guidelines clarifying that security tokens may fall under the Capital Markets Act, and the Digital Asset Basic Act is pending in the National Assembly to provide a comprehensive framework. The BOK has been cautious, focusing on CBDC research and pilot programs.

South Korea imposes a 20% capital gains tax on cryptocurrency trading profits exceeding KRW 2.5 million (approximately $1,900) per year, effective January 1, 2025 (delayed from 2023). The tax applies to transfers of virtual assets, including exchanges and gifts, with gains calculated as the difference between the sale price and the acquisition cost. A basic deduction of KRW 2.5 million is allowed, and losses can be offset against gains from other virtual assets. Reporting is required by May 31 of the following year. The National Tax Service (NTS) has intensified enforcement, tracking crypto transactions through exchanges and imposing penalties for non-compliance. In 2023, the NTS collected KRW 100 billion ($75 million) in unpaid taxes from crypto investors. The tax treatment of airdrops and staking rewards remains ambiguous, with the Ministry of Economy and Finance expected to issue clarifications.

South Korea has a vibrant crypto market with over 5 million active users, representing nearly 10% of the population. Retail trading dominates, with the Korea Exchange (KRX) reporting daily crypto trading volumes often exceeding KRW 1 trillion ($750 million). The 'kimchi premium'—a price discrepancy between Korean and global exchanges—has been a notable phenomenon, sometimes reaching 20-30% during bull markets. Institutional adoption is growing: major banks like KB Kookmin and Shinhan have partnered with exchanges for custodial services, and Mirae Asset launched a crypto fund in 2023. The country hosts major exchanges including Upbit, Bithumb, and Coinone, which collectively serve millions of users. Use cases extend beyond trading: Samsung supports crypto wallets on its Galaxy devices, and blockchain-based identity systems are being piloted in healthcare.