Seminar on 'Current Status of the Digital Asset Market and Major Legal Issues'

On July 18, 2025, Lee & Ko sponsored the seminar on 'Current Status of the Digital Asset Market and Major Legal Issues' hosted by Blockchain Law Society, Digital Asset eXchange Alliance (DAXA), and Digital Finance Law Forum.

In this seminar, the following summarizes the key presentations and discussions from each of the three sessions.

□ Session 1: Stablecoins and Monetary Policy — Internationalization of the KRW: Opportunity or Risk? (Session Chair: Hyun-Koo Kang, Attorney at Law Firm, Lee & Ko LLC)

• Presenter: Jong-Seung Kim, CEO, XCRYPTON

Introducing stablecoins for the internationalization of the KRW is undoubtedly a historical necessity and challenge. A limited internationalization experiment using KRW stablecoins as an offshore settlement method could be a viable alternative. A controlled experiment focused on trade settlements could allow for external distribution and capital flow management within manageable boundaries. However, unchecked expansion may accelerate de-KRWization and destabilize domestic capital controls. Therefore, a tightly controlled design is essential. For KRW stablecoins to reach the level of complementary currency, we must first experiment with a limited integrated internationalization model, and urgently establish legal and regulatory safeguards against risks such as currency speculation. Rather than simply debating issuance approval, we must deliberate on the necessary policy frameworks and institutional responses. The initiative must align with the Bank of Korea’s monetary policy and the Ministry of Economy and Finance’s foreign exchange policy. In the digital liquidity era, monetary and FX policies are inseparable, and internationalizing KRW stablecoins must proceed under strict control.

• Discussant: Jung-Doo Lee, Head of Center, Korea Institute of Finance

Institutionalizing KRW stablecoins is not optional but essential. However, with USD stablecoins accounting for over 90% of the global market and KRW stablecoins lacking a clear profit model, we must approach their competitiveness and utility with caution. Digital currencies, including stablecoins, are institutional tools with macroeconomic implications—not merely tech experiments. In the digital age, monetary and foreign exchange policies cannot be treated separately, necessitating integrated policy design. While we should leverage stablecoins’ utility, new regulatory and policy frameworks are needed to prevent financial market instability. Protection mechanisms for both domestically and internationally issued stablecoins must be promptly established.

• Discussant: Soo-Han Cho, Attorney at Law, UPRISE

If stablecoins are allowed, private companies will effectively create currency. To mitigate potential shocks, such as mass reserve liquidation impacting the bond market, these entities should meet bank-level capital and risk management requirements. Robust prudential supervision and risk response frameworks are essential—otherwise, systemic risks may increase. Although stablecoins offer payment utility, the current legal framework under the Electronic Financial Transactions Act, the Foreign Exchange Transactions Act, and the Capital Markets Act is incompatible. A new, separate regulatory statute is needed.


□ Session 2: Legal Issues on Foreign Participation in the Domestic Virtual Asset Market and Overseas Expansion of Domestic Service Providers (Session Chair: Jaejin Kim, Executive Vice Chairman, DAXA)

• Presenter: Chang-Min Chun, Professor, SeoulTech

Currently, foreign participation in Korea’s virtual asset market is effectively prohibited due to a 2017 administrative guidance from financial authorities. This vague “shadow regulation” exacerbates mismatches between FX and capital market regulation. To strengthen Korea’s global competitiveness, we must remove the dual barriers of foreign participation bans and restrictions on overseas expansion. Regulatory clarity and alignment with global standards are urgently needed. Practical solutions such as non-face-to-face real-name verification must be presented. The Special Financial Information Act, which imposes KYC and STR obligations directly on exchanges, is inconsistent with the current ban. Alternatives to consider include revoking the administrative ban, allowing institutional investors to open individual accounts, and enabling individual foreign investors to participate indirectly via "linked omnibus accounts" between domestic and qualified overseas exchanges. Applying capital market and FX-style monitoring and reporting systems to virtual asset service providers is worth exploring.

• Discussant: Seo-Hee Han, Attorney at Law, Barun Law LLC

Allowing foreigners into the Korean virtual asset market could increase foreign capital inflows. With today’s established AML technologies, foreigner onboarding is technically feasible. A paradigm shift in the financial authorities' perception and the provision of clear guidelines are urgently needed. Non-face-to-face real-name verification and issuance of real-name deposit/withdrawal accounts for foreigners should be enabled. If real-name accounts are difficult, then trading via USDT or USDC should be permitted. Use of standing agents and the implementation of non-face-to-face authentication systems for foreigners should be considered. For overseas expansion, allowing order book sharing with foreign subsidiaries under proper AML compliance and financial reporting could be a viable strategy.

• Discussant: Hae-Boong Lee, Director, Dunamu

We must attract "good money" while blocking "bad money" in the virtual asset market. Regulatory clarity and predictability are essential to managing global capital flows. As seen in the U.S. and elsewhere, Korea must clarify details under AML/CFT and FX laws. The issue is not a lack of regulation but lack of clarity. Based on the principle of reciprocity, we should consider gradually allowing investors from jurisdictions that meet FATF AML/CFT standards. A phased approval process, including regulatory sandboxes, could also be examined. Order book sharing with overseas partners should be allowed under certain conditions to attract foreign investors.

• Discussant: Jung-Ki Yoo, Attorney at Law, Bithumb

Korea is the only country where even legally residing foreigners cannot trade virtual assets. The AML infrastructure has significantly improved since the 2017 restriction. In light of the amended Special Financial Information Act and the upcoming User Protection Act, we must reconsider whether banning foreign participation is still a valid AML strategy. The current policy accelerates capital outflow to foreign exchanges. A more flexible, risk-based approach is needed. For overseas expansion, clear guidelines should be swiftly established, similar to the monitoring regime applied to financial investment companies.


□ Session 3: Corporate Participation in the Digital Asset Market and Spot ETF Issues
(Session Chair: Jong-Baek Park, Attorney at Law, Bae, Kim & Lee LLC)

• Presenter: Kyung-Eun Ryu, Professor, Korea University Law School

Corporate participation in the digital asset market can boost market credibility and attract global capital. However, at stage two, clearer definitions of professional investors, AML enhancement, and overseas monitoring systems are needed. At stage three, accounting, taxation, and disclosure frameworks must be in place to allow broader corporate participation. AML remains the top priority. Current law regulates fiat-to-fiat flows, but not crypto-to-fiat. Measures to prevent money laundering via shell companies must be developed to expand eligibility to general corporations.
For spot ETFs, the following prerequisites must be addressed:① Index computation methods and participant criteria,② Derivative-linked redemption mechanisms,③ Investor protection and sales regulations under the Financial Consumer Protection Act (e.g., suitability, duty to explain), and④ Capital gains and ETF trading tax regimes.If approved, institutional investment is expected to increase. However, a crash in the underlying asset could trigger bank runs and financial instability. Therefore, a comprehensive structure covering index calculation, custody/trust, liquidity provision, derivatives hedging, investor protection, and taxation is required.

• Discussant: Sung-Jin Kim, Director, Financial Services Commission (Virtual Asset Division)

Globally, regulatory trends are shifting from mere user protection toward reducing uncertainty and fostering innovation. Korea is also reviewing ways to allow corporate participation in stages to develop a healthier ecosystem. Regulatory alignment with Hong Kong, Singapore, the EU, and the U.S. is necessary. The Virtual Asset Committee can move quickly on matters not bound by law. Recognizing that there is no legal basis for the previous ban on corporate participation, Korea began allowing nonprofit entities in June 2025 and plans to release guidelines for professional investors later this year. While initial design focused on domestic corporations, there’s no reason to exclude foreign companies registered as professional investors. Spot ETF discussions must await amendments to the Capital Markets Act and development of risk management measures. Foreign and domestic spot ETF issues must be distinguished—distribution of foreign-approved products via Korean securities firms differs legally from domestic creation. Several phased scenarios are possible.

• Discussant: Se-Woon Hwang, Senior Research Fellow, Korea Capital Market Institute

Institutional participation contributes to risk diversification in stable markets but may amplify volatility in crises—hence, caution is needed. The corporate account debate is linked to the foreign account issue. Foreign accounts may even be simpler to manage. AML considerations apply equally to both. Foreign exchange issues, disclosures, accounting, and tax management systems must be incorporated. Swift action is necessary. Expanded futures listings on KRX may be required to support hedging. Investor protection measures such as strengthened suitability/explanation duties under the Financial Consumer Protection Act, or Hong Kong-style education/testing systems, should also be examined. For spot ETFs, minimizing NAV deviation between single-price domestic exchanges and multi-price foreign exchanges is essential. This requires pre-defining roles for asset managers, market makers, and authorized participants (APs), and determining whether cash or in-kind redemptions are to be adopted.