The State of Korean Digital Asset Compliance: While the Basic Act Waits
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South Korea's comprehensive Digital Asset Basic Act remains pending, but regulators aren't waiting. While policymakers debate the framework that will eventually govern the entire digital asset ecosystem, Korea's Financial Services Commission (FSC) has issued a string of interim rules in 2026 alone, tightening Travel Rule compliance, opening a tokenized securities pathway, and sharpening exchange accountability for scams.
For compliance officers, digital asset service providers, and institutional players heading to Korea Blockchain Week, understanding what's in effect now, not what might eventually pass, is essential.
Key takeaways
- The Digital Asset Basic Act (DABA) introduced in June 2025 may be pending; but developments continue
- Korea's Travel Rule is moving from a KRW 1,000,000 reporting threshold to zero-threshold, all-transaction transparency, effective February 19, 2027
- On September 4, 2026, the FSC announced a phased roadmap opening tokenized securities to institutional investors, starting February 2027
- Exchanges face sharpened responsibility for voice-phishing and scam losses, alongside existing capital and custody requirements
- Singapore, Japan, and the US are each advancing digital asset rules on different timelines, useful comparison for anyone heading into Korea Blockchain Week
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Korea is regulating digital assets in two phases, and the first is already in force. The Act on the Protection of Virtual Asset Users (VAUPA) which took effect in July 2024 established baseline investor protections, such as requiring virtual asset service providers (VASPs) to to keep customer deposits at banks, segregate customer assets, carry insurance or reserves against hacking, and monitor for suspicious transactions, with penalties for market manipulation.
The Digital Asset Basic Act, which represents "Phase 2" legislation, is a comprehensive framework covering licensing of digital asset service providers, crypto asset issuance and ongoing disclosure, market-abuse prohibitions, and stablecoins. As of this writing, the bill remains in consultation among the government, the ruling Democratic Party, and industry stakeholders.
DABA remains under consultation amid disagreement among stakeholders. The Financial Services Commission and the Bank of Korea disagree over who can issue won-denominated stablecoins, with one proposal requiring commercial banks to hold at least a 50% stake in issuers. Regulators have also proposed capping a major shareholder's equity in a digital asset exchange at 20%, a proposal the industry has opposed.
Current estimates suggest implementation is unlikely before late 2026 at the earliest, with exchange licensing applications potentially opening in Q4 2026 or early 2027, and licensing decisions extending through 2027. Regulators have signaled a preference for phased rollout over a single "big bang" implementation, to avoid disrupting the market.
What’s under consideration under proposed DABA
The Digital Asset Basic Act covers a wide range of areas, but three carry the most weight for digital asset operators building or scaling in the market, namely, how businesses get licensed to operate, how digital assets can be issued, and how they're allowed to trade.
Market entry runs on three tracks, based on business type. Digital asset trading, brokerage, and custody businesses need authorization. Entities would be required to demonstrate competence in cybersecurity, anti-money laundering compliance, and customer service systems. Governance standards would address questions of financial soundness, qualified personnel, and conflict of interest management. Collective management, wallet management, and advisory businesses fall under a lighter registration track. Order transmission and pseudo-advisory services only need to file a notification, and this track largely excludes foreign entities. The Bill also gives the Financial Services Commission a fourth lever. Under Article 90(1), it can designate certain digital asset brokers that meet specified criteria as digital asset exchanges, expanding their functions and roles rather than creating a separate license category for them.
Issuance rules apply only to domestically issued digital assets and are split into two categories. Stablecoins require authorization, proof of a redemption method, a reserve plan, and KRW 500 million in capital, and are limited to domestic corporations. General digital assets get a lighter path: issuers simply notify the Financial Services Commission, filing a standardized report on issuer information, technical details, and a user protection plan.
Distribution and custody, meanwhile, run through a new Trading Support Eligibility Committee, which reviews exchange listing decisions within one month and can order delisting over inadequate disclosures, security incidents, or user protection failures. Custody providers must keep user registries and hold assets under deemed trust status, with no arbitrary restrictions on deposits or withdrawals.
That said, while the Digital Asset Basic Act remains stalled in legislative consultation, Korea isn't waiting on it to build out the regulatory infrastructure of the market. Regulators are building out the framework incrementally under existing authority, and that existing framework already sets a real compliance bar.
Three regulatory developments shaping Korea's digital asset landscape
1. The Travel Rule and zero-threshold transparency
Korea's Cabinet approved amendments to eliminate the Travel Rule's KRW 1 million de minimis threshold. The amendment is expected to apply in February 2027, with compliance required for all VASP transactions regardless of amount.
Under the current framework, VASPs only transmit originator and beneficiary information for transfers exceeding KRW 1,000,000 (approximately USD 707). Under the amended rules set to take effect, registered VASPs must collect and transmit this information on every transaction, regardless of size.
For compliance teams, this means moving transaction monitoring and counterparty data collection from an exception-based model to continuous, end-to-end capture, a meaningful operational build-out before the February 2027 deadline.
2. Opening tokenization pathways (but cautiously)
On September 4, 2026, the FSC announced a phased roadmap for tokenized securities infrastructure, a clear signal of intent to open institutional access to digital assets under defined guardrails, not blanket permission. This roadmap builds on a framework that's only partially live today. The Capital Markets Act (“CMA”) amendments took effect February 3, 2026, and already extend distribution rules to investment contract securities, including fractional investment securities.
What's still pending is the Act's OTC brokerage provisions, which legalize multi-party OTC trading through licensed operators, replacing the old single-buyer, single-seller structure and creating the legal basis a platform would need to run a secondary market for tokenized assets, along with the Electronic Securities Act's DLT-based issuance regime.
The Electronic Securities Act introduces legal definitions for "distributed ledger" and "distributed ledger-registered stock," giving securities issued in token form legal effect for the first time, and it creates a new "issuer account management institution" system that lets issuers register and manage securities directly on a distributed ledger without going through an intermediary. Both the OTC brokerage provisions and this DLT issuance regime take effect February 4, 2027.
Phase 1 of the FSC's roadmap launches when the Electronic Registration Act update takes effect, permitting tokenization of privately pooled money market funds, institutional bonds, unlisted stocks via trust structures, and publicly offered fractional investment securities. Individual subscriptions are capped at KRW 30 million or 5% of the issuance, whichever is smaller, and retail investors additionally face an annual OTC purchase limit of KRW 100 million per exchange. Phase 2 expands tokenization to all publicly offered securities, including listed stocks and public bonds. Phase 3 aims to build on-chain payment infrastructure linked to stablecoins.
Stablecoins remain the most contested piece of Korea's regulatory agenda, and the roadmap makes that explicit: the FSC has said Phase 2 and Phase 3 timelines stay flexible depending on how Phase 1 plays out, the pace of technological innovation among market participants, and the pending stablecoin legislation.
3. Tighter guardrails for money laundering and scams
The FSC just added 1.93 billion won to digital asset surveillance in its budget report to the National Assembly on September 3, 2026. This funding aims to help the Financial Intelligence Unit (FIU) improve suspicious transaction analysis and provide more complete information to law enforcement agencies in response to the increase in money laundering using digital assets.
The message is clear; the FSC is closing the loop on digital financial crime.
Meanwhile, incidents involving Korean digital asset platforms have prompted the FSC to expand exchange responsibility for fraud losses. Digital asset exchanges are brought within the Special Act for Prevention of Loss Caused by Telecommunications-based Financial Fraud and Refund for Loss, alongside banks and other financial companies. This would mean that digital asset exchange service providers would be subject to the same level of anti-vishing and damage and loss relief duty that is currently in place for financial companies. The revised rules are officially scheduled to go live on October 1, 2026.
This shift reflects a regulatory view that as digital assets become more embedded in Korea's financial system, telcos operating them must act as institutional-grade guardians of user assets.
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Korea in context
South Korea is taking a structured, phased approach to digital asset regulation. While the country has successfully enforced foundational rules like the Travel Rule and VASP licensing to secure its crypto ecosystem, it remains more conservative, prioritizing market safety before expanding into more complex financial products.
This positions South Korea in a distinct category within the APAC region, balancing strict anti-financial crime enforcement with a highly structured, phased timeline for digital asset and market development.
Regulatory implementation status across jurisdictions
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What compliance officers should know
1. Operate on the rules in force today, not the ones still pending
Travel Rule zero-threshold transparency (February 2027), existing VASP capital and custody requirements, and sharpened fraud-loss responsibility are binding or nearly binding now. Zero-threshold reporting requires continuous, end-to-end counterparty data capture — a materially different operational lift than today's model. Waiting until early 2027 to start is late.
2. If you're pursuing tokenized securities, Phase 1 (February 2027) is your clock
Understand the KRW 30 million / 5% subscription caps, trust structures for unlisted stock tokenization, and the approval process now — not after Phase 1 opens.
3. Prepare for sharpened exchange responsibility on voice-phishing and scam losses
While October 2026 is a future regulatory requirement rather than an active compliance audit today, platforms must use this transition period to build advanced fraud detection networks, as they will bear the burden of proving they were not negligent when scams occur.
How TRM can support your Korea digital asset compliance strategy
1. Travel Rule compliance
TRM seamlessly integrates with Travel Rule protocols to verify the identities of originators and beneficiaries for digital asset transfers, ensuring firms are well equipped to meet Korea’s strict zero-threshold reporting requirements.
2. Wallet screening and transaction monitoring
TRM Wallet Screening surfaces sanctions exposure and potential regulatory violations tied to counterparties. TRM Transaction Monitoring flags on-chain patterns such as abnormal withdrawal velocity, connections to high-risk addresses, and rapid cross-exchange movements that can be indicative of account compromise or other suspicious activity. Combined, this intelligence provides teams with the signal needed to make more informed compliance decisions, as the FSC ramps up efforts to stamp out financial crime.
3. Tokenized asset monitoring and risk management
For issuers, see the illicit finance and sanctions exposure sitting in your holder base and in the fund flows moving in and out of your asset across issuance, secondary market activity, and at redemption. Screen wallets before minting and redeeming, monitor holder activity continuously against sanctions lists and illicit-finance typologies, and get alerted when exposure or behavior shifts. For the wider market, run the same lens outward: conduct due diligence on issuers, custodians, and VASP counterparties before you take on exposure, and keep those relationships under ongoing review. Standing up these controls now means your program is examination-ready, and already aligned with supervisory expectations as they formalize across jurisdictions, rather than rebuilt under a deadline.
