Author: Zen, PANews
South Korea's cryptocurrency market may be on the verge of a new landscape, with a shift from its previous dominance by retail investors to the potential entry of institutional participants.
On January 14, the KOSPI (Korea Composite Stock Price Index) broke through the 4700-point mark for the first time in its history during intraday trading, reaching another record high. Amid this bullish momentum in South Korea's stock market, significant positive developments have also emerged quietly within the country’s cryptocurrency market.
According to reports from South Korean media, the Financial Services Commission (FSC) of South Korea plans to lift the ban on corporate cryptocurrency investments that has been in place since 2017, allowing listed companies and professional investors to participate in cryptocurrency trading. At a government-private sector task force meeting on January 6, the FSC shared a draft of the relevant guidelines.
Breaking a nine-year restriction, South Korean listed companies will be permitted to invest in cryptocurrencies.
This new regulation essentially represents a continuation and further refinement of the 'Plan to Promote the Virtual Asset Market' announced by the FSC in February of last year. The original plan was to conduct pilot tests in the second half of last year, allowing some institutional investors with risk-bearing capacity to open real-name trading accounts for investment and financial purposes.
The target group eligible to participate in the pilot program consists of approximately 3,500 listed companies and enterprises registered as professional investors under the Capital Markets Act, excluding financial institutions. The FSC stated that professional investors registered under the Capital Markets Act are already permitted to invest in derivatives, which carry the highest levels of risk and volatility. Additionally, these enterprises exhibit strong demand for blockchain-related businesses and investments.
According to disclosures by the Seoul Economic Daily, the FSC plans to allow eligible corporate entities to invest up to 5% of their net assets in cryptocurrencies annually. The new regulation also specifies the range of permissible cryptocurrencies for investment, restricting purchases to the top 20 largest cryptocurrencies by market capitalization, focusing on $Bitcoin (BTC.CC)$ 、 $Ethereum (ETH.CC)$ cryptocurrencies with better liquidity and larger scale, such as Bitcoin and Ethereum.
The specific rankings will be based on data from South Korea's five major cryptocurrency exchanges, with the rankings determined every six months by DAXA, an alliance formed by these exchanges. Regarding whether US dollar-pegged stablecoins, such as Tether (USDT), should be included, regulators are still in discussions and have not yet provided clear guidance.
Furthermore, regarding the execution mechanism for trades, it is required that exchanges split and execute large cryptocurrency orders in batches, while setting limits on single-order sizes. This means that large buy or sell orders must be divided into smaller orders by the exchange and executed gradually, with monitoring for abnormal trading activities to minimize impacts on market prices and prevent manipulation and liquidity risks. This mechanism aims to ensure stable market operations even after institutional funds enter.
It should be noted that the provisions in the above draft regulations are not final. In its statement, the FSC emphasized that the guidelines are still under discussion, and key details such as investment limits and eligible assets have not yet been finalized. According to sources, the FSC is expected to release the final guidelines as early as January to February 2026. If the guidelines are successfully implemented, institutional cryptocurrency trading could officially commence by the end of 2026.
Distorted Market Structure Under Restrictive Policies: Retail Investors' Frenzy, Institutional Absence
South Korea's regulatory body's recent relaxation of the corporate ban on cryptocurrency investments marks a significant shift since the implementation of stringent regulatory policies in 2017.
In 2017, cryptocurrencies represented by Bitcoin experienced explosive growth in South Korea, with the 'Kimchi Premium' phenomenon becoming prominent. Retail speculation surged, and issues such as Initial Coin Offerings (ICOs) proliferated, raising concerns among regulators. On the other hand, due to considerations regarding anti-money laundering and financial crime prevention, South Korean authorities were concerned that large amounts of capital could circumvent regulation via crypto assets. Consequently, financial authorities swiftly introduced several emergency measures, including a ban on legal entities participating in cryptocurrency trading.
The nine-year corporate ban fundamentally altered the participation structure of South Korea's cryptocurrency market. The market's trading participants have been almost entirely filled by retail investors, while large institutions and corporate funds have been excluded, resulting in relatively limited trading volumes and activity in South Korea's market. Meanwhile, some institutions and high-net-worth funds seeking digital asset allocation have opted to move to overseas markets in search of more lenient investment channels.
The dominance of retail investors and the absence of institutions in the cryptocurrency market starkly contrast with the significant institutional presence in mature markets. Therefore, while the strict ban in 2017 initially effectively curbed domestic speculative fervor, it also led to South Korea's market becoming somewhat disconnected from the global trend toward institutionalization.
In fact, South Korea's regulatory authorities have gradually begun to ease restrictions on institutions' cryptocurrency activities in recent years. Over the past few years, as crypto assets have progressively matured globally and financial institutions' participation has significantly increased, South Korean authorities have realized that adhering rigidly to outdated rules would inevitably result in missed development opportunities. In South Korea's published '2026 Economic Growth Strategy,' digital assets are explicitly incorporated into the future financial landscape.
Starting last year, South Korea tentatively relaxed certain regulations, such as allowing non-profit organizations and cryptocurrency exchanges to sell their held crypto assets. With this new guidance drafted by the Financial Services Commission (FSC), the regulatory body has finally given the green light again to corporate cryptocurrency investments, making significant amendments to the stringent policies, forming an important part of South Korea's digital finance strategy.
The Entry of Heavyweights Amid DAT Narrative Hitting a Low Point
South Korea’s cryptocurrency market has long been known for its high speculation and fervent retail investor base. The upcoming lifting of restrictions on thousands of large enterprises and professional institutions, allowing them to enter as major new players, undoubtedly offers considerable room for industry imagination.
Some South Korean media outlets have cited examples, such as Naver, South Korea's internet giant currently acquiring Upbit's parent company, which holds equity worth 27 trillion won. According to the 5% cap, it could theoretically purchase approximately 10,000 Bitcoins. Such a massive influx of institutional funds will significantly enhance liquidity and depth in the local market. Industry insiders predict that this move will attract South Korean capital observing from overseas markets to return, entering the domestic cryptocurrency market through legal channels and supporting the local trading ecosystem. The potential inflow after deregulation could reach tens of trillions of won (over tens of billions of US dollars).
Moreover, under the previous ban, large companies were unable to enter the cryptocurrency sector, which somewhat dampened corporate enthusiasm for exploring blockchain technology and digital assets. After the lifting of restrictions, local cryptocurrency firms, blockchain startups, and related industries such as digital asset custody and venture capital are expected to receive an indirect boost.
Cointelegraph analysis points out that institutional entry will drive the expansion of local cryptocurrency companies and startup projects in Korea and lead to the emergence of enterprise-level Digital Asset Treasuries (DATs). At the same time, allowing legal cryptocurrency holdings is also expected to promote cross-border blockchain project collaborations, attract overseas cryptocurrency institutions to operate in Korea, and enhance Korea's status as a crypto-financial hub in Asia.
However, whether DAT strategies will work in Korea faces multiple challenges. On one hand, policy restrictions prevent Korean 'treasury companies' from fully leveraging their potential, with only a 5% investment cap meaning low cryptocurrency allocation. On the other hand, most cryptocurrency treasury companies, apart from pioneers like Strategy that have been established for years, have incurred significant losses due to the dual declines in cryptocurrencies and stocks, leading to waning interest globally in DAT narratives.
More convenient investment channels also reduce the necessity of DAT strategies. As major global markets advance the implementation of compliant investment products such as Bitcoin spot ETFs, institutions and investors can directly benefit from Bitcoin price increases through ETFs. With simpler and safer tools like ETFs available, there is no incentive to pay a premium for listed companies holding cryptocurrencies. Currently, Korea is also advancing Bitcoin-based spot ETFs, which could officially launch by the end of this year.
Another factor not to be overlooked is that, according to market observations, Korea’s cryptocurrency market has seen declining interest since the second half of last year, with many investors shifting to the stock market. As of January 14, the KOSPI index broke through the 4700-point mark intraday for the first time in history, reaching a new all-time high. With more verifiable fundamentals in sectors like semiconductors, AI, shipbuilding, and defense industries, DAT clearly cannot compete on par.
Nevertheless, the positive signal released by Korea's policy shift deserves recognition and anticipation. In the coming year, actual investment actions by Korean enterprises will be worth close attention as relevant guidelines and legal frameworks are finalized. However, for the cryptocurrency industry, self-strengthening remains critical—developing new narratives and regaining widespread participation from Korean investors are key challenges to overcome at present.
Editor/Doris
