South Korea’s Financial Services Commission (FSC) announced On January 15, 2025 that it held the second meeting of the Virtual Asset Committee to begin full-scale discussions on the second phase of the "Virtual Asset User Protection Act." (Virtual Asset User Protection Act).

Held at the government complex in Seoul, the meeting focused on legislative tasks and directions for enhanced regulation of the virtual asset market.

According to "Edaily", the committee reviewed issues surrounding "stablecoins," a subject of growing importance in global regulatory discussions. Key attendees included Vice Chairman Kim So-young of the FSC, the Digital Finance Policy Director General, and representatives from various ministries such as the Ministry of Justice, Ministry of Science and ICT, and the Bank of Korea.

Aligning with Global Regulatory Trends

Vice Chairman Kim emphasized the importance of addressing regulatory uncertainty amid rapid global changes. “The global virtual asset market is evolving quickly, with nations like the EU, Hong Kong, and Singapore leading efforts to protect users and improve market transparency,” Kim stated.

The EU’s Virtual Asset Market Act (MiCA), implemented late last year, was highlighted as a comprehensive model encompassing business entry requirements, trading regulations, and disclosure standards.

Kim also outlined South Korea’s goal of creating an integrated regulatory system covering virtual asset operators, markets, and users, stressing a comprehensive and systematic approach.

Key Legislative Focus Areas

The committee identified several priority areas for the second phase of the Virtual Asset User Protection Act:

• Regulations for Virtual Asset Operators: Establishing entry requirements, internal control obligations, and safeguards against conflicts of interest and unsound practices to enhance user protection.
• Market Transparency: Strengthening listing and disclosure standards for exchanges, which dominate South Korea’s virtual asset market. Proposals include improving the self-regulated "Trading Support (Listing)" process and introducing periodic disclosures, such as "Business Reports" and a "Major Matters Disclosure System" similar to those in capital markets.
• Stablecoin Oversight: Reviewing global practices, the committee discussed imposing stringent reserve management requirements and ensuring users' redemption rights to mitigate risks.

Roadmap for Implementation

The FSC plans to establish a task force and subcommittee to further refine the details of these legislative priorities.

Once reviewed, the proposed measures will undergo sequential deliberation by the Virtual Asset Committee, with a comprehensive second-phase bill expected in the latter half of 2025.

‍South Korea’s Crypto Evolution: Progress and Challenges

Last year, South Korea witnessed significant developments in its cryptocurrency sector, marked by regulatory changes and evolving policies.

The government postponed the implementation of a 20% tax on cryptocurrency gains exceeding 2.5 million won (approximately $2,000 USD) until 2027, providing more time to establish the necessary taxation frameworks.

Similarly, the Financial Services Commission (FSC) announced plans to gradually ease restrictions on corporate investments in virtual assets, aligning domestic regulations with global standards

On the other hand, the country continued to face challenges, including security concerns, as North Korean hackers were linked to substantial crypto heists.

These changes reflect South Korea’s dual approach of fostering innovation while addressing systemic risks in the digital asset ecosystem.