Korean financial decision-makers open institutional investment, thousands of major clients face cryptocurrency allocation choices

South Korea’s cryptocurrency market is experiencing its most significant policy shift in nine years. According to the latest policy developments from the Financial Services Commission (FSC), regulatory authorities are planning to lift the ban on corporate cryptocurrency investments that has been in place since 2017. This move means thousands of listed companies and professional investment institutions will have the opportunity to participate legally in digital asset allocation. This policy reversal not only marks a profound adjustment in Korea’s regulatory approach but also will reshape the composition of market participants in the country’s crypto industry.

Policy Shift: From Strict Ban to Gradual Opening

The regulatory decision in 2017 was a watershed moment for Korea’s crypto market. At that time, Bitcoin’s explosive rise in Korea triggered the “Kimchi Premium,” sparking a retail speculative frenzy and a proliferation of ICO scams. In response, financial authorities took a hard stance: banning institutional and corporate involvement in cryptocurrency trading, and, out of concerns about anti-money laundering and financial crime prevention, regulators worried that large sums of money could be funneled through crypto assets to evade oversight.

This ban persisted for nearly a decade. Recently, however, Korean policymakers have begun reassessing the situation. According to Korean media reports, the FSC shared a draft guideline during a government-private sector working group meeting this month, with plans to officially publish the final guidelines in early 2026. If successfully implemented, corporate crypto trading could commence by the end of 2026.

The underlying logic behind this policy shift is clear: as global digital asset markets mature and institutional participation increases significantly, Korea risks missing out on development opportunities if it remains overly restrictive. The Korean government’s “2026 Economic Growth Strategy” explicitly includes digital assets in its future financial landscape, reflecting a new understanding among top decision-makers about the industry’s prospects.

Specific Framework: Cautious Restrictions Amid Opening

The new policy framework sets clear boundaries for institutional participation. According to relevant guidelines, approximately 3,500 registered professional investors under the Capital Markets Act—namely listed companies and qualified corporate legal entities—will be eligible to participate in the pilot program, excluding financial institutions.

The restrictions are multi-dimensional: first, the investment cap is set at 5% of annual net assets; second, eligible cryptocurrencies are limited to the top 20 by market capitalization, focusing on highly liquid assets like Bitcoin and ETH; third, exchanges must define qualifying coins based on market cap rankings published biannually by the DAXA alliance (comprising Korea’s five major exchanges).

Regarding trading mechanisms, regulators have also devised detailed arrangements. Large orders must be split into smaller trades and executed gradually, with real-time monitoring of suspicious activities. The goal is to prevent market volatility and liquidity risks that could arise from large institutional inflows. This approach indicates that regulators are not blindly opening the floodgates but are seeking a balance between risk management and market stability.

Market Reshaping: From Retail Dominance to Institutional Participation

The nine-year ban on corporate involvement has created a unique structure in Korea’s crypto market: retail investors dominate almost entirely, while large institutions and listed companies are largely excluded. This contrasts sharply with mature global markets, where institutional players lead. Many institutions and high-net-worth individuals seeking digital asset exposure have turned to overseas markets for more relaxed investment avenues.

The implementation of this new policy is expected to change that landscape. Industry estimates suggest that future institutional capital flowing into Korea’s crypto market could reach tens of trillions of Korean won (over a hundred billion USD), significantly enhancing liquidity and trading depth domestically. For example, Naver, a tech giant acquiring the parent company of the Upbit exchange, has a book value of about 27 trillion KRW. At a 5% cap, this could theoretically buy around 10,000 Bitcoin. If large corporations follow suit, it could bring unprecedented capital into the market.

Beyond direct capital inflows, the policy opening is also likely to indirectly stimulate related sectors. Past bans have hindered the development of local crypto companies, blockchain startups, and digital asset custody services. Opening up is expected to generate new growth drivers for these areas. Cross-border blockchain collaborations may also increase, boosting Korea’s competitiveness as an Asian crypto financial hub.

Challenges Facing Policy Opportunities

However, the policy opening also presents complex challenges. The most prominent is the uncertain effectiveness of the enterprise-level digital asset treasury (DAT) strategy. While theoretically, institutional entry could trigger a wave of corporate token holdings, the reality is more complicated.

On one hand, the 5% investment cap limits the scale of corporate participation, making it difficult to achieve economies of scale. On the other hand, the DAT narrative in the global crypto market has cooled significantly. Most crypto treasury firms, except pioneering long-term holders like Strategy, have suffered substantial losses amid the “crypto and stock double decline,” dampening investor enthusiasm.

More critically, easier investment alternatives are reducing the necessity of DAT strategies. With Bitcoin spot ETFs launching across major markets worldwide, institutions and investors can directly benefit from Bitcoin price appreciation via ETFs without holding the underlying assets or paying premiums for corporate holdings. Korea is also pushing to launch a Bitcoin-based spot ETF by the end of the year. Under these circumstances, traditional DAT strategies will naturally become less attractive.

Additionally, changing market conditions are weakening regulators’ expectations. Since late last year, Korea’s crypto market enthusiasm has waned, with many investors shifting to equities. As of this month, the KOSPI index has broken through 4,700 points for the first time in history, with sectors like semiconductors, AI, shipbuilding, and defense—supported by solid fundamentals—becoming more attractive. In this environment, corporate large-scale crypto investment decisions are unlikely to be prioritized.

Outlook: Policy Refinement and Market Testing

Despite these challenges, the signals of openness from Korean regulators are still encouraging. Over the next year, as guidelines are refined and legal frameworks established, actual corporate investment actions will be key indicators to watch. Whether the policy truly materializes will depend on the enforcement efforts of relevant authorities and the response from market participants.

For the crypto industry itself, policy openness is ultimately just an external condition. Industry players need to craft new narratives to regain broad market attention—this remains the critical task. Korea’s policy shift is undoubtedly positive, but whether it can truly reshape the market landscape depends on the efforts of both the market and the industry.