KEYTAKEAWAYS
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South Korea enforces tighter digital asset rules—real estate purchase disclosures, leverage bans, and loan restrictions—to curb speculation, prevent capital flight, and protect financial stability.
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The government prioritizes a bank-led stablecoin framework, with central bank collaboration, positioning commercial banks as primary issuers instead of fully replacing money with central bank digital currency.
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Balancing sovereignty with innovation, South Korea adapts regulations amid evolving markets, aiming to encourage blockchain growth while maintaining control over systemic risks and monetary independence.
CONTENT
South Korea reshapes its digital asset governance through a dual-track approach: strict risk controls and bank-led stablecoin models to defend monetary sovereignty and foster innovation.
South Korea is quietly waging a silent financial war, building high walls to prevent virtual asset bubbles from infiltrating core economic sectors while accelerating the development of a state-led digital currency infrastructure in a bid for future financial dominance.
In September 2025, the South Korean government issued new regulations requiring the truthful declaration of funds from the sale of virtual assets for home purchases. This seemingly simple policy conceals a significant shift in South Korea’s financial strategy. Simultaneously, South Korea’s six major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, and Enterprise Bank) are actively preparing to participate in central bank digital currency testing. These two simultaneous events mark a new phase in South Korea’s digital asset governance, a dual-track strategy of “plugging leaks” and “unblocking the system.”
DEFENSIVE STRATEGY: DE-RISKING VIRTUAL ASSETS
The South Korean government has identified virtual assets as an “external threat” requiring strict regulation. New regulations on reporting funds for home purchases are just the tip of the iceberg. Virtual assets are highly popular in South Korea, with nearly one-third of adults holding digital assets—twice the rate in the United States. The Korean won is the world’s second-largest medium for cryptocurrency-to-fiat trading, with $663 billion in trading volume year-to-date, accounting for approximately 30% of global fiat-to-cryptocurrency trading activity.
Faced with such a massive market, South Korea has chosen to proactively address the situation. The government has revised real estate transaction regulations, requiring that when purchasing a home with funds from virtual assets, such as the liquidation of virtual assets, be truthfully declared in the capital raising plan. This policy, jointly formulated by the Ministry of Finance, the Ministry of Land, Infrastructure and Transport, and other departments, explicitly includes proceeds from virtual asset sales as owned funds, requiring the submission of supporting documentation for related transactions. The Financial Services Commission of South Korea has issued its first-ever guidelines for virtual asset lending services, completely prohibiting leveraged and cash lending, and establishing individual limits and fee caps. These measures are intended to discourage short-selling-like practices and prevent excessive speculation.
OFFENSIVE STRATEGY:BUILDING A NATIONAL DIGITAL CURRENCY SYSTEM
While strictly regulating virtual assets, South Korea is actively developing a state-led digital currency system. The Bank of Korea has established a Virtual Asset Committee to monitor the cryptocurrency market and renamed its central bank digital currency research and development team.
In 2025, the Bank of Korea (BOK) slowed down its CBDC development, suspending its pilot program originally scheduled for the end of 2025, in favor of a “bank-first” stablecoin model. Bank of Korea Deputy Governor Ryoo Sangdai explicitly expressed support for banks to become the primary issuers of the country’s stablecoins. Major Korean commercial banks (KB, Shinhan, Hana, Woori, Nonghyup, and Corporate Bank) and the Korea Financial Settlement Service are working together to establish a joint venture to issue a joint won stablecoin. This bank-led stablecoin model complements, rather than replaces, CBDCs, demonstrating a digital continuation of the traditional dual currency system of central bank and commercial bank money.
The South Korean government’s dual-track strategy centers on a struggle for financial sovereignty and governance in the digital age. This policy reflects a deep-seated anxiety about monetary sovereignty. South Korea currently lacks a dedicated regulatory framework for stablecoins. Currently, stablecoins are classified as “virtual assets,” falling under the general definition of “virtual assets” under the Virtual Asset User Protection Act.
This regulatory gap has raised concerns about monetary sovereignty and capital outflows in South Korea. Policymakers are concerned that foreign stablecoins (particularly those based on US dollars) could threaten South Korea’s monetary sovereignty and lead to capital outflows and a reliance on foreign stablecoins in trade settlement systems, thereby creating regulatory arbitrage. In January 2025, the Virtual Asset Committee of South Korea’s Financial Services Department announced its second phase of digital asset legislation, focusing on establishing a dedicated stablecoin regime.
President Lee Jae-myung made institutionalizing a Korean won stablecoin a key campaign promise, and legislative momentum intensified after his election. Policy discussions have shifted from focusing on risks to recognizing the benefits of a domestically regulated won stablecoin, such as enhancing the won’s global competitiveness and innovating the domestic payment system.
CHALLENGES AND FUTURE:RISKS AND PROSPECTS OF A DUAL-TRACK STRATEGY
The South Korean government’s dual-track strategy faces multiple challenges. Legislative complexity presents challenges, requiring the revision or enactment of 951 laws and regulations. Regional competition is also intensifying: the US GENIUS Act has accelerated the globalization of US dollar stablecoins, raising concerns about South Korea’s monetary sovereignty. Surrounding financial hubs are also rapidly developing digital asset reserves: Japanese companies are building digital asset reserves, Hong Kong has enacted comprehensive stablecoin regulations, and Singapore aims to double the number of crypto exchange licenses by 2024.
Technically, South Korea needs to balance monetary sovereignty with innovation. To address these challenges, it is pursuing a dual-track approach: allowing non-bank stablecoin experiments within a regulatory sandbox while simultaneously promoting institutional stablecoins led by commercial banks. South Korea is also seeking to ensure technological neutrality and interoperability between public and private blockchain infrastructure through a hybrid structure, bridging the traditional financial system with private innovation.
The coming year will be a critical test for South Korea’s digital asset strategy. Policymakers will need to closely monitor several key indicators: the progress of ETF legalization, the timing of stablecoin launches, and the performance of Bithumb’s IPO. South Korea’s ability to maintain a balance between strict compliance and encouragement of innovation will determine its ability to consolidate its position as a crypto-financial hub.
South Korea is not alone. From the United States to Japan, Singapore to Hong Kong, major economies are exploring the regulatory and development paths for digital currencies. South Korea is unique in its combination of high public participation and strong regulatory intervention. In the coming years, South Korea may become one of the first countries to implement a joint stablecoin issued by major commercial banks. These bank-issued stablecoins serve institutional use cases requiring wholesale settlement and regulatory trust, while non-bank stablecoins are optimized for the retail economy and Web3 ecosystem, forming a parallel structure.
South Korea is taking a pragmatic middle path: neither a blanket ban nor complete liberalization, but rather finding a balance between national regulation and market innovation.
