South Korea’s Crypto Licensing Shift and Tax Delays

The proposed digital asset framework is nearing completion, with the bill expected to settle licensing regimes for exchanges and stablecoin issuance rules. None of this is law yet; the legislative effort remains a proposal that will define how trading platforms operate under one broader structure. I see this as a clear move toward standardization, forcing founders and controlling shareholders to dilute their stakes if ownership limits are imposed. This could complicate large business groups’ expansion into the market, but it ensures stricter oversight. The framework covers both exchange licensing and stablecoin conditions, which will be finalized as the bill moves forward.

Tightening Compliance and Registration

Registration rules for virtual asset service providers tightened from August 20, 2026, requiring strict anti-money laundering measures. Upbit became the first exchange to receive official registration from the Financial Intelligence Unit on September 17, setting a precedent for others. By the deadline last Friday, only 29 out of 66 crypto exchanges had submitted an application for registration in accordance with the revised Act on Reporting and Using Specified Financial Transaction Information. The newly nominated chief financial regulator, Koh Seung-beom, insisted on maintaining the Sept. 24 deadline without extension to prevent potential damages to crypto investors. He argued that many exchanges have been calling for a longer grace period, but he refused to yield to pressure. One condition demands exchanges obtain a bank contract to provide real-name bank accounts to users for better transparency. Most exchanges are still having trouble obtaining these contracts because banks expressed fear of being held responsible for possible financial crimes from exchanges. Democratic Party Lawmaker Kim Byung-wook suggested to Koh in the hearing that the FSC should rather hold exchanges more responsible for their financial crimes instead of protecting banks. The FSC announced it will establish a "virtual asset inspection department" under the FIU to supervise cryptocurrency exchanges and handle relevant legal affairs.

Tax Delays and Market Realities

While the licensing framework advances, the crypto tax debate runs on a separate track and is getting louder. The presidential office is discussing a fourth postponement of the country’s 22% crypto gains tax, potentially moving the start from January 1, 2027, to 2029. This review centers on officials’ concern that missing US trading records would leave users of domestic exchanges bearing an uneven burden. South Korea is scheduled to begin international exchanges of crypto transaction information in 2027, while US participation is scheduled for 2029. A South Korean official described the US as accounting for nearly half of the virtual asset market, making access to American trading records a major obstacle. Without the US information connection, the National Tax Service would have to pursue overseas transactions individually, a far cry from pulling domestic exchange records. This creates a significant enforcement gap that policymakers must address before launching the levy. Meanwhile, trading volumes at Upbit and Bithumb have continued to fall, making a deterioration in profitability unavoidable. Fee income accounts for 97 – 98% of revenue at these two exchanges, so declining prices directly impact their bottom line. Upbit decided to cut its 2025 cash dividend by 33.6% from the previous year to reflect lower trading volumes. Bithumb faces added pressure due to fee discounts and potential sanctions linked to a mistaken Bitcoin payout incident where customers were credited with 620,000 phantom bitcoins worth more than 63 trillion won. The Financial Supervisory Service recently wrapped up its on-site inspection of the case and plans to determine whether to impose sanctions after an internal review. Will the tax delay align with the US reporting timeline, or will lawmakers force an earlier start?