South Korea's Financial Services Commission stated on May 23 that the timing of Phase 2 guidelines for corporate crypto trading will be linked to the Digital Asset Basic Act and related legislation. Kim Sung-jin, FSC Virtual Asset Division Director, announced at a conference held at the National Assembly Members' Hall that the regulator is reviewing the need to allow over-the-counter trading via separate intermediaries, not just exchanges, once corporate market access is permitted. The FSC released a roadmap in February last year outlining phased market opening; Phase 1 currently allows nonprofit entities and crypto operators to open real-name accounts for selling purposes, while Phase 2 covering listed companies and professional investors remains unfinalized.
FSC Links Phase 2 Guidelines to Digital Asset Basic Act Legislation
Kim Sung-jin stated that the FSC continues internal discussions on the Phase 2 guidelines and will coordinate with relevant agencies due to the connection with second-stage legislation. He did not provide a specific release date for the guidelines. When asked about the possibility of opening the corporate market within the year, Kim responded that he personally views it positively from various perspectives. The FSC emphasized in its second-half policy plan that it will pursue the matter as swiftly as possible in consultation with relevant agencies and the National Assembly.
FSC Proposes OTC Trading via Separate Intermediaries for Corporate Market
Kim Sung-jin stated that corporate entities are expected to have different trading patterns compared to individual investors. He explained that corporations may have incentives to use third-party intermediaries rather than trading directly on exchanges. Kim noted that demand similar to counterparty trading in stock markets, as opposed to competitive trading, could emerge. He stated that the FSC is considering the need to allow various forms of trading through separate brokers in addition to existing exchanges, though he did not specify the scope or detailed mechanisms.
FSC Plans Custody as Separate Regulated Business in Phase 2 Legislation
Kim Sung-jin stated that custody will be classified as a separate business category when drafting the Phase 2 legislation, describing it as critical infrastructure for the digital asset market. He explained that safe storage and management of digital assets are prerequisites for smooth trading. The FSC is examining appropriate entry regulations and operational conduct rules for custody services. Kim noted that digital asset custody involves managing private keys—the means of controlling assets—representing a specialized form of trust, and that the FSC will consider the European Union's approach of simplifying entry regulations for traditional financial firms entering crypto businesses based on functional similarity. Regarding mandatory separation of custody functions from exchanges, Kim stated that the FSC has not found overseas precedents for forced separation and believes conduct regulations should be enhanced to balance user convenience with conflict-of-interest concerns within exchanges.
FSC Reviews Internal Control Standards for Corporate Crypto Investors
Kim Sung-jin stated that establishing internal control standards for investing corporations is one of the key focuses when allowing corporate crypto trading. He explained that since corporate entry into the domestic crypto market is unprecedented, there have been calls for best practices in internal compliance. The FSC conducted various internal discussions on this matter and will reference opinions presented at the conference when drafting guidelines. Conference participants emphasized that merely issuing corporate accounts is insufficient to attract institutional investors, stressing the need for accompanying infrastructure including custody, internal controls, and external audits. Ryu Hong-yeol, CEO of VDEX, argued that relying solely on exchanges' self-reporting makes it difficult to cross-verify asset authenticity, advocating for custody to be institutionalized as a separately regulated industry. Shin Hee-jin, Director at Kyobo Securities, stated that the institutional investor era involves entirely different dimensions beyond allowing corporate accounts, requiring standards for investment decisions, execution, custody, audits, and loss attribution before institutions can actively invest.
FAQ
What did South Korea's FSC announce on May 23 regarding corporate crypto trading?
The FSC stated that the timing of Phase 2 guidelines for corporate crypto trading will be linked to the Digital Asset Basic Act and related legislation. Kim Sung-jin, FSC Virtual Asset Division Director, announced at a conference that the regulator is reviewing the need to allow over-the-counter trading via separate intermediaries once corporate market access is permitted.
Why is the FSC considering custody as a separate regulated business?
Kim Sung-jin stated that custody is critical infrastructure for the digital asset market because safe storage and management of digital assets are prerequisites for smooth trading. The FSC plans to classify custody as a separate business category in Phase 2 legislation and is examining appropriate entry regulations and operational conduct rules, considering that digital asset custody involves managing private keys as a specialized form of trust.
