Source: Newsis

Translation: KarenZ, Foresight News

On February 13, South Korea held its third virtual asset committee meeting, planning to allow legal entities to open real-name virtual asset accounts in phases, gradually opening up institutional participation in the virtual currency market. This policy marks South Korea's formal opening of the virtual asset market to institutional investors, reflecting changes in the South Korean virtual currency market environment and signaling a trend towards the mainstreaming of cryptocurrencies. However, at the same time, law enforcement agencies such as the prosecution and the National Tax Service have been allowed to open real-name accounts, which may transfer and sell criminal proceeds confiscated in virtual currencies and collect delinquent tax properties, potentially raising market concerns.

What directives were issued at the third virtual asset committee meeting convened by the South Korean Financial Commission today? The following content is translated from Newsis.

The Vice Chairman of the South Korean Financial Commission, Kim Jae-ryong (phonetic), convened the third virtual asset committee meeting and decided to advance the plan for legal entities to open real-name virtual asset accounts in three phases. Initially, it will allow law enforcement agencies, non-profit organizations, virtual asset exchanges, and other institutions that need to open accounts for "cash conversion purposes" to participate, with plans to gradually expand to professional investment entities (for investment and financial purposes) and general legal entities in the future.

Therefore, the South Korean Financial Commission has drafted a roadmap to gradually allow legal entities to participate in the virtual currency market without compromising user protection and market stability.

Phase One: Law Enforcement Agencies, Non-Profit Organizations, and Exchanges

Opening of Law Enforcement Agency Accounts (Completed)

Law enforcement agencies such as the prosecution, National Tax Service, Customs Service, and local governments have been allowed to open accounts since last November for the transfer and sale of virtual assets due to the confiscation of criminal proceeds and the compulsory collection of delinquent tax properties.

Opening of Non-Profit Organization Accounts (Planned for Completion in Q2 2025)

Non-profit organizations, such as designated donation groups, need to receive and liquidate virtual asset donations, and will be allowed to open legal entity accounts in the second quarter of this year. However, due to the lack of specific standards and procedures in the process of receiving and liquidating virtual assets, internal control standards need to be established in advance.

Opening of Virtual Asset Exchange Accounts (Planned for Completion in Q2 2025)

Exchanges need to sell virtual assets (their own assets) obtained through transaction fees for operational expenses such as employee salaries and taxes, thus requiring urgent sale transactions.

Given that such sale transactions may have a proprietary nature, potentially harming users by causing price declines, the South Korean government plans to establish public guidelines to limit the types and quantities of virtual assets sold.

Phase Two: Professional Investment Entities (Planned to Start in H2 2025)

The second phase policy, to be advanced in the second half of this year, plans to allow professional investment entities to invest in virtual assets. According to the Capital Markets Act, professional investment entities do not include financial companies but target listed companies and entities registered as professional investors (about 3,500). This is to pilot transactions for investment and financial purposes, primarily starting with trading by institutional investors with risk-bearing capacity.

Due to the potential anti-money laundering risks associated with large-scale virtual asset transactions, the government will implement this after establishing relevant guidelines and monitoring measures. Additionally, since the investment capabilities of various entities differ, the opening of accounts will undergo detailed review by banks and exchanges.

Phase Three: Participation of General Legal Entities (Medium to Long-Term Plan)

The full participation of general legal entities will be studied as a medium to long-term plan, as it involves institutional adjustments related to secondary legislation on virtual assets and foreign exchange tax systems. The second phase of legislation needs to include regulations on the business activities of virtual asset exchanges and the regulatory framework for stablecoins. At the same time, the Foreign Exchange Transaction Act needs to be improved to monitor cross-border virtual asset transactions.

Future Plans and Outlook

The Financial Commission plans to work with the government and private institutions to establish guidelines for legal entities participating in virtual asset investments. Vice Chairman Kim Jae-ryong stated, "Regarding the second phase of virtual asset-related laws, including stablecoins, trading merchants, and trading regulations, we will accelerate discussions within the virtual asset committee." He also added, "Regarding token securities, relevant legal amendments have been submitted, and we will actively support the National Assembly in swiftly passing the bill."

Source: https://www.newsis.com/view/NISX20250213_0003064010

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