In September 2025, the South Korean government issued new regulations requiring that funds from the sale of virtual assets used for purchasing real estate must be reported truthfully. This seemingly simple policy hides a significant transformation in South Korea's financial strategy. At the same time, the six major banks in South Korea (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, and Industrial Bank) are actively preparing to participate in central bank digital currency testing. These two concurrent events mark a new phase in South Korea's digital asset governance, entering a dual-track strategy of "plugging leaks" and "guiding flows."
The South Korean government has regarded virtual assets as an "external threat" that requires strict control. The new reporting regulations for real estate purchase funds are just the tip of the iceberg of this strategy. The popularity of virtual assets in South Korea is high, with nearly one-third of South Korean adults holding digital assets, a figure that is twice that of the United States. The Korean won is also the second-largest medium for trading cryptocurrency globally, with a trading volume of $663 billion from the beginning of the year to date, accounting for about 30% of global fiat cryptocurrency trading activities.
Faced with such a large market, South Korea has chosen to take proactive measures. The government has revised real estate transaction regulations, requiring that when funds from the sale of virtual assets are used to purchase real estate, they must be truthfully reported in the funding plan. This policy was jointly formulated by multiple departments, including the Ministry of Finance and the Ministry of Land, Infrastructure and Transport, clearly incorporating the funds from the sale of virtual assets into the category of self-owned funds, with relevant transactions needing to submit proof materials. The Financial Services Commission of South Korea has issued its first guidelines for virtual asset lending services, completely prohibiting leverage and cash lending, and setting personal limits and maximum fees. These measures aim to block behaviors similar to short selling and prevent excessive speculation.
While strictly regulating virtual assets, South Korea is actively building a state-led digital currency system. The Bank of Korea has established a virtual asset committee to monitor the cryptocurrency market and has renamed its central bank digital currency research team.
In 2025, the Bank of Korea slowed down the development of CBDC, suspending the originally planned pilot at the end of 2025, and instead supporting a "bank-first" stablecoin model. Ryoo Sangdai, the Deputy Governor of the Bank of Korea, clearly stated support for banks to become the main issuers of the country's stablecoins. Major commercial banks in South Korea (KB, Shinhan, Hana, Woori, Nonghyup, and Industrial Bank) are working with the Korea Financial Settlement Institute to establish a joint venture to issue a Korean won stablecoin. This bank-led stablecoin model complements rather than replaces CBDC, reflecting the digital continuation of the traditional dual currency system of central bank money and commercial bank money.
The core of the South Korean government's dual-track strategy is the competition for financial sovereignty and governance rights in the digital age. The policy contains deep-seated anxieties about monetary sovereignty. South Korea currently does not have a dedicated regulatory framework for stablecoins. At this stage, stablecoins are classified as "virtual assets," falling under the general definition of "virtual assets" in the Virtual Asset User Protection Act.
This regulatory gap has raised concerns in South Korea about monetary sovereignty and capital outflow. Policymakers worry that foreign stablecoins (especially US dollar stablecoins) may threaten South Korea's monetary sovereignty and lead to capital outflow and reliance on foreign stablecoins for trade settlement, thus triggering regulatory arbitrage issues. The virtual asset committee of South Korea's financial services announced the second phase of its digital asset legislative agenda in January 2025, focusing on establishing a dedicated system for stablecoins.
President Lee Jae-myung made institutionalizing the Korean won stablecoin a key commitment during his campaign, and the legislative momentum has further strengthened after his election. Policy discussions have shifted from focusing on risks to recognizing the benefits of a domestically regulated Korean won stablecoin, such as enhancing the global competitiveness of the won and innovating the domestic payment system.
The South Korean government's dual-track strategy faces multiple challenges. There is complexity in legislation, requiring the revision or formulation of 951 laws and regulations. Regional competition is also intensifying: the US GENIUS Act has accelerated the globalization of US dollar stablecoins, raising concerns in South Korea about monetary sovereignty. Nearby financial hubs are also rapidly positioning themselves—Japanese companies are establishing digital asset reserves, Hong Kong has issued comprehensive stablecoin regulations, and Singapore is set to double the number of cryptocurrency exchange licenses by 2024.
Technologically, South Korea needs to balance monetary sovereignty with innovation. To address these challenges, South Korea is adopting a dual-track approach: allowing non-bank stablecoin experiments within a regulatory sandbox while promoting institution-led stablecoins by commercial banks. South Korea is also attempting to ensure technological neutrality and interoperability between public chains and private infrastructure through a hybrid structure, connecting the traditional financial system with grassroots innovation.
The coming year will be a critical testing period for South Korea's digital asset strategy. Policymakers need to closely monitor several key indicators: the progress of ETF legalization, the launch timeline for stablecoins, and the performance of Bithumb's IPO, among others. Whether South Korea can maintain a balance of "strict compliance + encouraging innovation" will determine its ability to solidify its position as a crypto financial center.
South Korea is not alone. From the United States to Japan, from Singapore to Hong Kong, major economies are exploring regulatory and developmental paths for digital currencies. What sets South Korea apart is its combination of extremely high public participation and strong regulatory intervention. In the coming years, South Korea may become one of the first countries to achieve the issuance of joint stablecoins by major commercial banks. These bank-issued stablecoins serve institutional use cases that require wholesale settlement and regulatory trust, while non-bank stablecoins are optimized for retail economies and the Web3 ecosystem, forming a parallel structure.
South Korea is taking a pragmatic middle path: neither fully banning nor completely loosening regulations, but seeking a balance between national regulation and market innovation.
Related: South Korea sets a 20% cap on cryptocurrency lending rates, banning leveraged loans
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