Korea's Crypto Leap: FSC to Permit Institutional Investors to Open Virtual Asset Trading Accounts in H2

Risks of Institutional Participation

South Korea will allow certain institutional investors to open virtual asset trading accounts starting in the second half of the year, the country’s Financial Services Commission (FSC) announced on Feb. 13. The commission said about 3,500 corporate entities, including listed companies, will be “subject to the pilot test.”

In a statement, the FSC said institutional investors, or so-called qualified investors, have demonstrated significant demand for pursuing blockchain-related business, hence its approval of allowing them to invest in crypto. In addition to the rising demand, the FSC said it took this step to ensure South Korea is not left behind as other countries embrace virtual assets.

However, the Korean regulator acknowledges that increased corporate participation will naturally come with risks. It revealed that steps aimed at strengthening safeguards to prepare the virtual asset market for this will be instituted.

“A set of transactions guidelines will be prepared to provide appropriate information for banks to strengthen verification of the purpose of transactions and the origin of funds, for virtual asset exchanges to make use of third-party custody and management services, and to expand information disclosures made available to investors,” reads part of the FSC statement.

Banks and virtual asset exchanges will both be tasked with thoroughly screening institutions seeking to open virtual asset trading accounts.

Regarding the decision to initially exclude financial companies, the FSC said its virtual asset committee recommended this to prevent potential risk contagion into the wider financial system. For corporations not considered qualified investors, the FSC said a decision will be made only after authorities review the virtual asset market and the pilot test’s progress, among other conditions.