At the start of 2025, South Korea found itself amidst political turmoil and regulatory upheaval, which significantly impacted the nation's crypto sector. The year kicked off with the delay of the planned 20% capital gains tax on crypto until 2027, marking the third postponement of the tax implementation. Lawmakers cited economic uncertainty and political instability as reasons for the delay, fearing investor flight to offshore exchanges and challenges in tracking wallet-based profits.
In mid-January, a joint statement by the US, Japan, and South Korea warned against North Korean crypto hackers, with the Lazarus Group being named a prime suspect in major hacks in 2024. The statement urged crypto firms to enhance security measures against malware and fake IT freelancers.
The Financial Services Commission (FSC) in South Korea announced on January 15 that it would review corporate access to trading accounts on local exchanges. However, no official decision was made at the time, with the FSC emphasizing the need for further evaluation to ensure investor protections and stricter stablecoin oversight.
The enforcement of the Virtual Asset User Protection Act saw the indictment of a trader for market manipulation on January 16. Simultaneously, Upbit, the largest crypto exchange in South Korea, faced a suspension notice for allegedly violating Know Your Customer (KYC) requirements in over 500,000 instances.
Following service disruptions triggered by a surprise declaration of martial law in December 2024, Upbit and Bithumb announced plans to compensate users on January 23. The martial law incident led to a surge in trading activity that overwhelmed local platforms.
In February, the FSC unveiled a plan to allow corporate entities to open crypto trading accounts in phases by late 2025, starting with charities and universities. This initiative aims to increase institutional participation in the crypto market under tighter compliance standards.
The regulatory landscape intensified in February, with the arrest of a fraudster accused of manipulating the market through false advertising and pump-and-dump tactics. Upbit operator Dunamu faced regulatory action for compliance failures, leading to a partial business suspension.
As the crackdown continued into March, the FSC reviewed legal pathways to allow Bitcoin spot exchange-traded funds (ETFs), signaling a potential shift in South Korea's stance on crypto-based ETFs. The FIU also began blocking unregistered exchanges and unauthorized crypto platforms to enhance regulatory oversight.
As South Korea's crypto industry navigates through stricter regulations and heightened enforcement actions, the sector's evolution is closely monitored ahead of the upcoming
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