South Korea is moving forward with two significant regulatory adjustments that will reshape the operational landscape for virtual asset service providers (VASPs). The Financial Services Commission (FSC) has announced it will introduce exceptions to major shareholder disqualification criteria for minor legal violations, while the Supreme Court is nearing a deadline for public comments on proposed rules that would give crypto exchanges just seven days to disclose customer holdings after receiving a court seizure order.
The FSC's decision, detailed in a written response to the National Policy Committee, aims to align crypto sector regulations with existing financial market laws. The new exceptions will mirror practices already established under the Capital Markets Act and the Online Investment-Linked Finance Act, ensuring a more consistent regulatory framework. This move comes just ahead of a revised enforcement decree of the Act on Reporting and Using Specified Financial Transaction Information, set to take effect on August 20, which significantly tightens screening standards for major shareholders. Without the FSC's exception, even minor infractions could lead to disqualification, potentially hindering legitimate business operations.
Meanwhile, the Supreme Court's proposed amendments to the Civil Execution Rules would create a standardized process for creditors to freeze, identify, and liquidate virtual assets held by debtors. If finalized on the current timetable, the rules would take effect October 1. Under these rules, once an exchange receives a court order, it must, within one week, state whether it recognizes the debtor’s claim, identify the type and quantity of assets, and disclose any competing seizures or priority rights. For assets held through a custodian, the court could attach the debtor’s right to receive them, prohibiting transfers and disposal.
The seizure framework has broad implications in one of the world’s most retail-heavy crypto markets. As of February 2025, 16.29 million people held accounts across South Korea’s five largest exchanges, representing nearly 32% of the population and exceeding the number of domestic stock holders. While the process offers more legal certainty for creditors, it poses practical challenges when a debtor controls the crypto via private keys, as seizure would only take effect upon actual transfer to an enforcement officer.
Both developments reflect South Korea’s ongoing effort to balance strict anti-money laundering and consumer protection with the need to foster a competitive crypto industry. The FSC's proportionate approach to shareholder reviews is seen as a positive step for investment and stability, while the Supreme Court’s rules extend the regulatory build-out into civil debt enforcement, giving exchanges a more formal role in the legal system.
