South Korea’s National Assembly has approved a major overhaul of the country’s crypto licensing framework, tightening entry requirements for virtual asset service providers (VASPs) and expanding scrutiny to include controlling shareholders.
On Thursday, lawmakers passed an amendment to the Act on Reporting and Using Specified Financial Transaction Information, a key part of Korea’s anti-money laundering (AML) framework for digital assets. The bill, approved at a plenary session, is expected to take effect six months after enactment.
Under the new rules, background checks for crypto firms seeking to operate in South Korea will be more extensive. Regulators will now review not only company executives but also major shareholders. The list of red flags has been expanded beyond financial crimes to include offenses such as drug trafficking, tax evasion, fair-trade violations, serious economic crimes, and breaches of the nation’s crypto user protection law.
The amendment also strengthens the powers of the Financial Intelligence Unit (FIU), allowing it to assess a company’s overall ability to operate. In addition to financial health, the FIU can evaluate internal controls, legal history, and overall credibility when determining licensing eligibility.
Conditional licenses and former employee oversight
Regulators will now be able to issue conditional licenses, enabling the FIU to impose requirements to mitigate money-laundering and user-protection risks.
The amendment also addresses a long-standing loophole involving former financial industry employees. The FIU must notify a company’s CEO if a former employee is sanctioned for AML violations, and the company is required to inform the individual and retain the related records.
The Financial Intelligence Unit (FIU), under the oversight of the Financial Services Commission (FSC) and following National Assembly approval, is expected to finalize implementation details and industry guidance ahead of the law’s enforcement.
South Korea considers ownership caps for crypto exchanges
On Wednesday, South Korea’s financial watchdog expressed support for ownership limits on crypto exchanges, aligning them more closely with securities market rules as part of the proposed Digital Asset Basic Act. Financial Services Commission Chair Lee Eog-weon emphasized that exchanges should be treated as market infrastructure rather than ordinary private companies.
The FSC is reviewing a proposal to cap major shareholders’ stakes in exchanges at roughly 15% to 20%. While the plan has faced pushback from exchange operators and concerns within the ruling party, Lee’s comments represent the strongest signal yet that the regulator is prepared to implement stricter governance rules.
