South Korea's top financial regulator is considering allowing foreign investors to participate in the domestic cryptocurrency market, provided that local exchanges meet anti-money laundering (AML) standards.
Kim Sung-jin, Director of Virtual Assets at the Financial Services Commission (FSC), stated in a parliamentary conference that he "agrees" with the approach of allowing foreign investors to access the Korean crypto market. He also mentioned that the FSC will review measures to attract global capital, emphasizing that current conditions may change if exchanges meet AML standards.
Currently, foreign investors are restricted from trading on Korean crypto exchanges due to strict identity verification (KYC) requirements. Domestic users must use locally registered bank accounts under their real names to trade from fiat to crypto. According to Peter Chung, Research Director at Presto Research, South Korea applies capital account control measures and investment portfolio restrictions. If the government allows foreigners to trade on Korean exchanges, these restrictions may be relaxed.
This move reflects a change in South Korea's capital control policy to catch up with global crypto development trends. According to Chung, if South Korea opens its market, this could promote domestic crypto industry growth and expand the USD stablecoin market. Additionally, it may help eliminate the "Kimchi Premium" – the price difference between crypto on Korean and international exchanges due to limited global liquidity.
However, regulators remain cautious, believing that local exchanges have not fully met AML requirements. Before implementing the first crypto KYC regulations and legal framework, the FSC applied the Travel Rule in March 2022, requiring exchanges to collect and store information about senders and recipients in transactions exceeding one million won (approximately $681). Recently, major Korean exchanges have also announced they will apply the Travel Rule to transactions below this threshold.
Previously, the Korean Financial Intelligence Unit fined Upbit – the country's largest cryptocurrency exchange – for allegedly supporting transactions with unregistered foreign exchanges. However, this penalty was suspended after the Seoul court accepted Upbit's appeal.
South Korea is currently one of the world's largest cryptocurrency markets, with altcoin dominance. In March this year alone, Upbit's monthly trading volume exceeded $85 billion.
