South Korea is moving fast on crypto regulation. The government just entered Phase 2 of its overhaul, targeting stablecoins and crypto ETFs with new rules this year. The push comes after $346 million in stablecoins fled the country in June alone, with investors chasing high-risk derivatives and DeFi services banned at home.
Yoo Young-jun, the Digital Finance Policy Director at the Financial Supervisory Service, said the agency is "currently consulting with relevant agencies with the goal of completing legislation on virtual assets as soon as possible." The urgency is real. That $346 million outflow matched 78% of what South Korean investors bought in overseas stocks that month. Opposition lawmakers took notice. Rep. Lee Jong-wook called it a wake-up signal, saying the government must "move swiftly to improve regulations" before more capital leaves.
From protection rules to tokenization
Last year South Korea passed its first crypto framework, the Virtual Asset User Protection Act, which forced exchanges to segregate user funds and banned wash trading. That was Phase 1. Now Phase 2, the Digital Asset Basic Act, is under review. It opens the door to crypto ETFs, tokenization, and corporate participation. Domestic firms have been locked out for nine years, but that ban lifts under the new rules.
The FSC is also considering blocking U.S. dollar stablecoins like USDT and USDC to boost Korean alternatives. Meanwhile, the country is deepening its central bank digital currency work with nine major banks for wholesale payments. About 10 different stablecoin and crypto bills are circulating in the National Assembly.
The catch: a 22% capital gains tax on profits above $1,700. That proposal keeps drawing fire from traders and investors who see it as a barrier to adoption, even as Seoul tries to position itself as a crypto hub.
This article is informational and does not constitute financial advice. Crypto markets carry significant risks.
