South Korea prepares to unlock institutional crypto investment with new guidelines due Q3

South Korea's financial watchdog announced Wednesday that it plans to issue comprehensive guidelines for institutional cryptocurrency investment by the third quarter.

The Financial Services Commission made the announcement during a meeting with local crypto industry experts.

While investment guidelines for public companies and professional investors are expected in the third quarter, the FSC said it aims to push out guidelines for non-profit organizations and crypto exchanges earlier, targeting April.

The FSC first announced in January that it would gradually lift the de facto ban preventing institutional investors from investing in cryptocurrencies. Last month, the regulator unveiled that it intends to start by allowing charities and universities to sell their crypto holdings in the second quarter.

The announcement of the upcoming detailed guidelines further solidifies South Korea's shift in stance on crypto, moving away from its strict opposition to crypto asset exposure in traditional financial markets.

Institutional participation could further drive growth and significantly boost liquidity in the South Korean crypto market, one of the world's largest and altcoin-heavy retail markets. As of the end of November 2024, around 15.6 million people traded crypto in South Korea, according to the Korea Economic Daily. That is equivalent to about 30% of the entire population.

During Wednesday's meeting, FSC Vice Chairman Kim So-young said that South Korea is speeding up efforts to foster its crypto market, acknowledging that the U.S. administration under Donald Trump has accelerated global discussions on crypto.

Kim highlighted that the upcoming guidelines should outline the "best practices" for institutional crypto investment, including standards for crypto trading, disclosure and reporting.

The FSC official also urged local banks and crypto exchanges to ramp up their anti-money laundering and cybersecurity efforts to prevent possible illicit activities and hacks. Under local regulations, users of crypto exchanges are required to verify their accounts with real-name bank accounts.

While local media reported last year that the FSC was reviewing its ban on local spot cryptocurrency exchange-traded fund listings, the topic was not mentioned in FSC's latest release. 

Meanwhile, the FSC has also started developing the second set of rules for the two-part crypto regulatory framework, the first of which went live last year. The second part of the crypto law is set to focus on stablecoins and regulating crypto business owners.