South Korea's Cryptocurrency Reform: Will New Regulations Enhance Confidence While Preserving Innovation?

South Korea's National Assembly is on the verge of passing comprehensive new regulations aimed at Virtual Asset Service Providers (VASPs), a move that could have far-reaching effects on the international cryptocurrency industry. The draft law, which is currently being considered, would require thorough background investigations for VASP shareholders with criminal histories, representing a major change in the way crypto companies obtain regulatory clearance.

, this initiative is part of South Korea's broader effort to strengthen oversight of its rapidly expanding digital asset market while preserving its influence in the global crypto arena.

The legislation would empower financial regulators to deny VASP registration if principal shareholders—defined as those with substantial control—have criminal convictions anywhere in the world. This marks a departure from existing regulations, which primarily assess the company itself, by extending scrutiny to all significant stakeholders, including overseas investors. Current VASPs would also be subject to renewed evaluation, risking their licenses if shareholders do not comply with the updated requirements. This presents immediate compliance hurdles, especially for smaller firms with intricate ownership arrangements

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The scheduled review of the bill on November 27 is consistent with South Korea's ongoing initiatives to reform its crypto sector. Authorities are seeking to curb illegal activities and bolster investor trust. Should the bill pass, the swift rollout would give VASPs limited time to adjust ownership structures or manage the costs of continuous compliance checks.

that these new rules could speed up industry consolidation, giving larger, well-funded companies an advantage over smaller firms that may struggle to adapt to the stricter requirements.

Opponents of the bill argue that its broad criteria for disqualification—without clear exceptions for less serious or unrelated offenses—could hinder technological progress. Supporters, on the other hand, maintain that these steps are essential for eliminating bad actors and fostering a more reliable digital asset industry. The effectiveness of the policy will depend on fair enforcement that safeguards investors while not imposing excessive obstacles on legitimate enterprises.

The bill’s focus on transparency among shareholders could set a benchmark for other countries. South Korea’s regulatory choices often shape global standards, given its prominence in the cryptocurrency sector. By including foreign criminal records in its vetting process, the country highlights the international scope of the new rules, potentially encouraging other nations to follow suit.

international investments, as foreign stakeholders with criminal backgrounds in their own countries might be barred from participating in South Korea’s crypto industry.

With the November 27 review drawing near, both the crypto industry and regulators worldwide are paying close attention to how South Korea manages the balance between strict oversight and fostering innovation. The decision could reshape global VASP regulations and further cement South Korea’s influence in the evolution of digital finance.