[Kim Hyo-bong's Global Radar] UK Takes the Lead… No More Delaying South Korea's Virtual Asset Law

South Korea’s Digital Asset Legislation Enters Second Phase Amid Global Regulatory Progress As South Korea's presidential election approaches, the digital asset industry eagerly awaits potential policy shifts under a new administration, notably the anticipated second phase of digital asset legislation. This new regulatory framework is expected to permit Initial Coin Offerings (ICOs) and expand services within the sector. Since December 2017, when the South Korean Office for Government Policy Coordination released its “Emergency Measures on Virtual Currency”—an announcement lacking a legal foundation—the market has been constrained by implicit government bans. Over the years, these restrictions have intensified, further limiting digital asset services. For instance, after issues with Paycoin, payment services using digital assets became restricted. Similarly, post-Delio incident, services aggregating and managing digital assets faced prohibitive measures. If enacted, the second-phase legislation will allow businesses to obtain licenses for previously prohibited services. The crucial question is how the legislature will define various digital asset business categories and set licensing requirements. These definitions will be critical for the framework's effectiveness in supporting the industry while maintaining oversight. We begin exploring international cryptocurrency regulations to provide insights for South Korea’s framework. Our series starts with an in-depth look at the United Kingdom's newly proposed regulation. United Kingdom’s Cryptoasset Regulatory Framework: Insights for South Korea? On April 29, 2025, the UK government introduced the draft *Cryptoasset Regulatory Activities and Other Provisions under the Financial Services and Markets Act 2025* (the “Cryptoasset Draft Order”). The draft aims to categorize major cryptoasset services as “regulated activities” under the Financial Services and Markets Act (FSMA). Key services include: 1. Operating a cryptoasset trading platform 2. Principal dealing in cryptoassets 3. Agency trading on behalf of others 4. Safeguarding or managing cryptoassets 5. Arranging cryptoasset deals, including staking services 6. Issuing stablecoins A closer look at these categories showcases the UK's detailed approach to clarifying regulation scope and application. ## Platform Operations Beyond Order-Book Formats “Cryptoasset trading platform operations” covers order-book systems, request-for-quote (RFQ) systems, and automated market-making (AMM) models used in institutional markets, applying to any platform matching third-party orders. ## Principal Dealing in Cryptoassets Principal dealing includes all self-account transactions, market-making, OTC desk operations, and lending or borrowing cryptoassets. ## Agency-Based Cryptoasset Trading This regulates brokerage activities connecting buyers and sellers or facilitating transactions on their behalf. ## Safeguarding and Custodial Services This involves holding private keys or controls enabling asset transfers on others’ behalf. For example, in multi-signature (MPC) setups, even partial key control makes a holder a custodian subject to regulation. A DeFi protocol pooling user ETH, with signatories controlling transfer rights, would classify those signatories as custodians. ## Brokering Deals, Staking Included This broad category covers arrangements enabling cryptoasset deals without asset custody or control. Brokering for staking, such as locking up customer assets for rewards, falls under this regulation. ## Stablecoin Issuance The UK plans to regulate stablecoins as investment assets, not electronic money. This approach suits financial services regulation better than e-money rules, given the low adoption of stablecoins for payments. South Korea’s Next Steps: Defining Industry Categories Following the June presidential election, South Korea is expected to enter a legislative season. Drawing on global examples like the UK, South Korea needs a classification method ensuring comprehensive coverage without regulatory gaps. The UK's focus on core industry functions achieves both specificity and simplicity. If implemented by late 2025, the UK's FSMA amendments could make it among the first globally—after the EU—to have a comprehensive cryptoasset regulatory framework. The U.S. Senate's failure to pass the GENIUS Act highlights the global regulatory challenges. For South Korea, aligning with global progress while tailoring rules to domestic market realities is crucial. A streamlined, effective regulatory framework will support the growth of the digital asset sector, ensuring robust investor protection and market integrity. About Attorney Hyo-Bong Kim - Bachelor of Laws, Yonsei University (2009) - Passed the 51st National Judicial Examination in South Korea (2009) - Completed the 41st Judicial Research and Training Institute (2012) - LL.M., Columbia Law School (2017) - Formerly with the Financial Supervisory Service (Digital Finance Innovation Bureau: 2022-2024; Virtual Asset Supervision Bureau: 2024) With over a decade of experience at the Financial Supervisory Service (FSS), Attorney Hyo-Bong Kim has expertise in regulatory frameworks and digital finance. At the FSS, Kim advanced virtual asset user protection laws, developed autonomous digital asset listing regulations, and designed regulatory systems. Now a partner at Bae, Kim & Lee LLC (BKL), he specializes in blockchain, token securities, financial licensing, anti-money laundering, and other digital finance legal matters.