South Korea’s financial authorities are taking a two-track approach to virtual asset regulation: opening controlled testing grounds while firmly resisting calls for broad deregulation. On June 22, 2026, the Financial Services Commission (FSC) announced plans to expand its regulatory sandbox to include the Virtual Asset User Protection Act, allowing firms to test innovative blockchain-based services under relaxed compliance requirements. The move was detailed at an event chaired by FSC Chairman Lee Eog-weon, where the commission outlined a strategy to adapt the financial regulatory framework to evolving market conditions.
At the same time, a coordinated response from the FSC, the Ministry of Economy and Finance, and the Bank of Korea made clear that no immediate easing of existing virtual asset rules is forthcoming. The regulators’ review, triggered by a June 8 meeting between the Ministry of SMEs and Startups and industry representatives, concluded that most proposed deregulation measures would require amending current laws, and no policy shift had been confirmed. An FSC official stated the agency is listening to industry opinions on sub-regulations rather than planning to ease them, while the Ministry of Economy and Finance said it is not reviewing any deregulation.
The sandbox expansion is expected to cover tokenized securities, DeFi platforms, payment systems, and digital asset custody solutions, giving startups and established firms a clearer path to experiment. The Virtual Asset User Protection Act, enacted in 2023, mandates user safeguards such as deposit segregation, insurance against hacks, and prohibitions on unfair trading. By incorporating it into the sandbox, the FSC balances innovation with investor protection. Conversely, the rejection of broader deregulation means exchange licensing, token listing rules, and institutional participation requirements will remain unchanged in the near term, reflecting South Korea’s cautious stance amid global crypto market turbulence.
