South Korea may soon allow foreign investors to trade on its domestic cryptocurrency exchanges, a move that could reshape the country’s crypto market and boost global participation. The Financial Services Commission (FSC) said it is open to lifting restrictions if local exchanges demonstrate adequate anti-money laundering (AML) capabilities.
Kim Seong-jin, head of the FSC’s Virtual Asset Division, made the remarks during a seminar titled “Digital Asset Hegemony Competition and South Korea’s Strategy,
” held at the National Assembly. “I agree with the direction that foreigners should be allowed to invest in domestic virtual assets,” Kim said, according to local outlet Bloter.
“This can be improved on the condition that virtual asset exchanges have a certain level of anti-money laundering capabilities.”
Regulatory Hurdles and Conditions
Current South Korean regulations prohibit corporations and foreign individuals from investing in virtual assets through local platforms. The restriction is part of a broader framework enforcing strict know-your-customer (KYC) rules, which require users to verify their identity using real-name local bank accounts.
The FSC previously adopted the Travel Rule in March 2022, in line with the Financial Action Task Force’s recommendations. This rule mandates exchanges to collect and store information on both the sender and recipient for any crypto transaction above one million won (approximately $681). Major exchanges in the country have recently expanded compliance by applying the rule to smaller transactions.
Despite these efforts, the FSC has signaled that local exchanges are still falling short of full AML readiness. Earlier this year, Upbit, the country’s largest crypto exchange, was penalized by the Financial Intelligence Unit for allegedly facilitating transactions with dozens of unregistered foreign exchanges. A Seoul court later paused the penalty by granting an injunction in Upbit’s favor.
Market Impact and Strategic Shifts
Allowing foreign investment would mark a significant shift in South Korea’s capital controls, long designed to manage portfolio flows. “Korea imposes capital account restrictions — control over portfolio investments,” said Peter Chung, Head of Research at Presto Research. “Allowing foreigners to trade crypto on Korean exchanges would mute such restrictions.”
Analysts believe the policy change could strengthen the country’s competitiveness in digital assets and stabilize the market. Chung noted that lifting the restriction would reduce the so-called Kimchi Premium — a pricing discrepancy caused by South Korea’s relative isolation from global liquidity. It could also support the growth of the USD stablecoin market.
South Korea is among the largest cryptocurrency markets globally, known for high altcoin trading volumes. In March, Upbit recorded over $85 billion in monthly trade volume. While the FSC has not committed to a timeline, Kim’s remarks suggest the government is considering aligning with broader global trends.
