Over the past eight years, South Korea's attitude towards cryptocurrency assets has been in a subtle state of division.

On one hand, it has one of the most active and emotional cryptocurrency trading markets in the world. With a high density of retail investors and rapid trading frequency, new narratives are almost always amplified first in the Korean market. On the other hand, at the institutional level, public companies and professional institutions have long been explicitly kept out—prohibited from holding or allocating, let alone including them on their balance sheets.

Thus, a long-standing yet rarely acknowledged structural contradiction has gradually taken shape: the market has matured, but the system has remained absent.

On January 12, this contradiction was finally broken by official action. The Financial Services Commission (FSC) of South Korea officially approved that public companies and professional investors can allocate up to 5% of their capital to the top 20 cryptocurrencies by market capitalization each year.

This marks the formal end of the substantial ban on institutional participation in the cryptocurrency market that has been in place since 2017.

Institutional Easing

If we only look at the percentage, this policy is not radical; the truly important change lies in "who is allowed to enter the market."

In recent years, the keywords repeatedly emphasized by Korean regulators have always been two—investor protection and systemic risk. This time, however, the regulators did not choose to fully open up but instead provided extremely clear boundaries:

• Limited to public companies and professional investors (approximately 3,500 entities granted market access, including public companies and registered professional investment institutions)
• Limited to the top 20 mainstream cryptocurrencies by market capitalization
• Allocation cap set at 5% of capital

This is not about encouraging risk appetite; it is about doing something more realistic: when cryptocurrency assets have already become an important asset class at the societal level, continuing to keep all institutions out is itself beginning to create new risks.

The "easing" of the system is not a shift towards radicalism but rather a belated rational correction.

Cost of Outflow

This change did not happen suddenly, nor did it stem from a shift in ideology; it has been pushed forward repeatedly by reality.

By 2025, the amount of funds transferred by South Korean investors to overseas cryptocurrency trading platforms has exceeded 160 trillion won (approximately 110 billion USD).

Against the backdrop of regulatory lag, cryptocurrency assets have effectively become one of the main investment assets in South Korea, with nearly 10 million investors, while trading activities increasingly occur outside the regulatory view.

The consequences of this are not complex but extremely real:

• Stagnation in the growth of local trading platforms
• Investors forced to turn to overseas platforms like Binance and Bybit
• Both risks and funds flowing out, while regulation struggles to cover them

In such a structure, continuing to maintain "institutional prohibition" is no longer prudent but is amplifying systemic vulnerabilities. Now, as local compliant channels are reopened, this portion of funds that were forced to flow out finally sees the possibility of returning.

From "Blocking" to "Easing"

What is more noteworthy is that this is not an isolated policy adjustment.

Recently, the South Korean Ministry of Finance has clearly stated that it will promote the launch of spot ETFs for digital assets. From discussions on stablecoins to the release of institutional holdings, and then to the establishment of standardized investment tools, the regulatory logic is undergoing a clear transformation.

When public companies are allowed to directly allocate cryptocurrency assets, and the market is simultaneously preparing compliant, regulated, and clearable financial products, the signal is very clear: what regulators truly care about is no longer "whether to let institutions in," but "how to keep institutions within the system."

This means that South Korea is building a complete path for institutional participation: from direct holdings to standardized products, and then to compliant trading and clearing systems, rather than dealing with scattered, passive cases.

What has truly changed is not South Korea's attitude towards cryptocurrency assets, but the regulators finally acknowledging: this market can no longer be excluded from the system.

As public companies, professional institutions, and compliant investment channels begin to align simultaneously, the role of cryptocurrency assets in South Korea is also changing—it is no longer just a passively tolerated gray market but is formally included as a type of asset that can be managed, constrained, and must be acknowledged within the financial system.

This step may not have come early, but at least, it has finally begun.

*This article is for reference only and does not constitute investment advice. The market has risks, and investment should be cautious.

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