Regulation of Cryptocurrency and Initial Coin Offerings (ICOs) in South Korea
South Korea prohibited domestic companies and start-ups from participating in ICOs in September 2017. South Korea’s Financial Services Commission (FSC) banned all forms of ICOs however they are described. Margin trading of virtual currencies is also illegal.
After weeks of rumours that the Korean authorities were considering banning cryptocurrency trading exchanges, the FSC instead issued guidelines regulating cryptocurrency trading exchanges on 23 January 2018, designed to counter speculative trading activities. The government also introduced anti-money laundering guidelines for banks dealing with cryptocurrencies requiring them to monitor cryptocurrency exchanges they service for unusual transactions, and confirm the funding source and transaction purpose where money laundering is suspected. Red flags for money laundering activities include deposits or withdrawals of more than KRW10 million (US$9,400) per day or KRW20 million (US$18,800) per week, or a company or an organization depositing or withdrawing money from their bank accounts to trade cryptocurrencies.
Korea implemented a new “real-name account system” with effect from 30 January 2018, to replace a system in which banks opened virtual accounts for the customers of cryptocurrency exchanges for the deposit and withdrawal of money. Under the new system, customers must open an account with the bank providing virtual account services to the cryptocurrency exchange they use. Those who do not have an account at that bank can withdraw money from the virtual account, but cannot make further deposits into it .
South Korea apparently accounts for some 20% of global Bitcoin transactions and many Koreans have invested a large portion of their savings in cryptocurrencies because of the lack of available high-yield investment options. A recent survey found that three out of ten salaried workers in South Korea have cryptocurrency investments .
Note: The above represents Charltons’ current understanding of the regulation of ICOs in different jurisdictions. Charltons advises only on Hong Kong law and while the above represents our understanding of the legal position in certain other jurisdictions, legal advice from qualified lawyers in the relevant jurisdictions should be sought in relation to any particular transaction or situation. Further, this note is intended for educational purposes and it does not constitute Hong Kong legal advice. Specific advice must be sought in relation to any particular situation.
- Bitcoin.com. “South Korea Releases Official Guidelines for Cryptocurrency Exchanges and Banks”. 24 January 2018. <https://news.bitcoin.com/south-korea-releases-official-guidelines-cryptocurrency-exchanges-banks>
- Quartz. “South Korea is walking back threats to ban cryptocurrency trading”. 14 January 2018. <https://qz.com/1179606/south-korea-is-walking-back-on-threats-to-ban-cryptocurrency-trading/>