[Institutional Web3 Forum] "Korea to Reorganize Virtual Asset Regulations by 2027... Only Prepared Operators Will Survive"

It has been assessed that the Korean virtual asset market has entered a transitional period in which legislation, enforcement, and international regulations are being reorganized simultaneously, with the abolition of the 1 million won threshold, the introduction of the two-way Travel Rule, and the obligation to re-report VASPs all overlapping.

At the 'Institutional Web3 Forum' held at the GLAD Hotel in Yeongdeungpo-gu, Seoul at 1 p.m. on the 12th, Representative Attorney Kim Tae-rim of Axis Law Firm gave a presentation on the topic of 'Web3 Regulation & Compliance Guide That Institutional Investors Must Know,' stating that South Korea's virtual asset regulation has entered a transitional phase in which legislation, enforcement, and international standards are being reorganized simultaneously.

Attorney Kim explained current Korean regulations along three axes—the legislative clock, the enforcement clock, and the international standards clock—and stated, “The environment is being reorganized in stages from the implementation of entry regulations on August 20, 2026, to August 20, 2027.”

In particular, it was emphasized that regulations regarding the Travel Rule and overseas transactions are rapidly being strengthened. According to the announcement, starting January 1, 2027, the Travel Rule criteria, which previously applied only to transactions of 1 million won or more, will be abolished, and the obligation to provide information will apply to all previous transactions regardless of amount or quantity.

Furthermore, while the focus was previously on the obligations of the sender, obligations of the receiver will be added going forward. If the receiver fails to receive the requested information, they must demand it from the sender; if the sender fails to provide it, the receiver will even have an obligation to refuse the transaction.

Attorney Kim explained, “While major countries such as the FATF, the EU, Japan, and the U.S. are all strengthening various obligations, differential regulations on foreign VASPs and personal wallets are also being applied in detail,” adding that Korea’s differential regulations on foreign VASPs and personal wallets are “a model that references the Japanese model but plans for regulations that are much more detailed and strict than those in Japan.”

In addition, it was added that legislation regarding AML obligations for lawyers, accountants, and tax advisors, as well as AML obligations for stablecoin issuers, is also scheduled for the future.

He said, "I understand that the exchange and financial authorities will hold discussions regarding the burden resulting from the changes to the Travel Rule," but added that if the legislative notice is finalized, it will be necessary to examine whether the currently operating Travel Rule solutions can actually implement the strengthened two-way Travel Rule system and whether they are capable of risk classification and STR response.

In addition, entry regulations and the re-reporting system, which will be implemented starting August 20, 2026, were also cited as key changes.

He stated, “Existing VASP license holders must also re-report,” adding, “It is crucial to check whether the list of currently operating VASP licenses remains unchanged after November 20.” Entry regulations and VASP re-reporting requirements include major shareholder eligibility reviews, debt ratio regulations, and the obligation to secure a minimum of four AML personnel.

Attorney Kim also emphasized that as grounds for disqualification related to the Act on the Regulation of Concealment of Criminal Proceeds, the Narcotics Control Act, the Fair Trade Act, the Act on the Punishment of Tax Crimes, and the Act on Specific Economic Crimes are being added, “when conducting M&A or attracting investment, it is essential to practically review in advance whether the counterparty or related parties have grounds for disqualification as major shareholders.”

Exchange operators also emphasized that they must evaluate institutions and that preparations such as the legality of board resolutions, proof of funding sources, UBO verification, and EDD pre-packages are necessary.

In addition, they explained that changes resulting from the amendment of the Foreign Exchange Transactions Act would also follow.

Attorney Kim explained, “Previously, one could obtain a VASP license simply by completing the reporting under the Act on Reporting and Use of Specific Financial Transaction Information, but now an obligation to register with the Ministry of Economy and Finance under the Foreign Exchange Transactions Act has been added.” He added, “Since regulations have been included requiring the fulfillment of requirements such as data central exchange institutions and computer network connection in addition to the reporting under the Act on Reporting and Use of Specific Financial Transaction Information, it is important to check whether actual implementation is feasible.”

He told institutional investors, “You must continuously monitor whether the 27 currently registered operators have passed the re-registration process,” adding that “you must also check user protection obligations and whether KYC systems have been established.” He also advised that prior inspections are necessary regarding the use of overseas exchanges, the transfer of self-held wallets, and overseas SPV transaction structures.

Referring to recent rulings involving Dunamu, Upbit, and Bithumb regarding enforcement, he explained, “The core message of the Dunamu ruling is that at the time, there were no specific regulations regarding transactions under 1 million won, and regulatory authorities also did not provide detailed guidelines,” adding, “It acknowledged that Dunamu took its own measures.”

However, he stated, “At that time, it was an issue in an unregulated area, but now, the structure is such that non-compliance problems arise in a situation where regulations already exist,” adding, “It is not an issue that should be approached in a general sense based solely on the Dunamu ruling.”

He also emphasized, “The key insight to be gained from the Dunamu case is that thorough documentation and internal controls were prepared even before regulations were fully established,” adding that “institutions must also thoroughly establish internal controls, data preservation, and training and monitoring systems, even if it is difficult to predict the full direction of future regulations.”

Attorney Kim stated, “Korea is currently in a period of tremendous change where the timing of legislation, enforcement, and internationalization converges at once,” adding, “Ultimately, businesses that prepare during this chaotic time will seize opportunities in the subsequent stabilization phase.”

The Institutional Web3 Forum was an event co-hosted by TokenPost, the Korea Fintech Industry Association (KORFIN), and the Open Blockchain & DID Association (OBDIA), and officially sponsored by Bithumb, Coinone, and Korbit. Designed for financial institutions and institutional investors to share Web3 investment insights and network, the event was attended by approximately 100 representatives from domestic commercial banks, securities firms, insurance companies, fintech, and digital asset industries via pre-invitation.

It is expected to become a venue where domestic institutions with an interest and vision for Web3 gather to address key agendas closely connected to institutional finance, such as stablecoins, custody, and on-chain financial infrastructure, thereby creating practical trends and momentum for the domestic Web3 industry.