After 160 trillion won of capital outflow, 3,500 listed companies enter the market

Over the past eight years, South Korea’s attitude towards crypto assets has been in a delicate state of division.

On one hand, it hosts one of the most active and emotionally driven crypto trading markets globally. Retail investor density is high, trading frequency is rapid, and new narratives are almost always amplified immediately in the Korean market. On the other hand, at the institutional level, listed companies and professional institutions have long been explicitly kept out—no holdings, no allocations, let alone inclusion on balance sheets.

Thus, a long-standing but rarely acknowledged structural contradiction has gradually taken shape: the market has matured, but the institutional framework has always been absent.

On January 12, this contradiction was finally broken by official action. The Korea Financial Services Commission (FSC) officially approved: listed companies and professional investors can allocate up to 5% of their equity capital annually to the top 20 crypto assets by market cap.

This marks the end of the de facto ban on institutional participation in the crypto market that has been in place since 2017.

Regulatory Softening

In terms of proportion, this policy is not particularly aggressive; the truly significant change lies in “who is allowed to participate.”

In recent years, Korean regulators have repeatedly emphasized only two keywords—investor protection and systemic risk. This time, however, regulation did not choose to fully open the floodgates but instead set very clear boundaries:

• Limited to listed companies and professional investors (approximately 3,500 entities gaining market access, including listed companies and registered professional investment institutions)
• Limited to the top 20 mainstream crypto assets by market cap
• Allocation cap at 5% of equity capital

This is not about encouraging risk appetite but about doing something more pragmatic: as crypto assets have become an important asset class at the societal level, continuing to exclude all institutions creates new risks.

The “softening” of regulation is not a move toward radicalism but a delayed rational correction.

Cost of Outflow

This change did not happen suddenly, nor was it driven by a shift in ideology, but was repeatedly pushed forward by reality.

By 2025, the amount of funds transferred by Korean investors to overseas crypto trading platforms has exceeded 160 trillion won (about $110 billion).

Against the backdrop of regulatory sluggishness, crypto assets have in fact become one of South Korea’s main investment assets, with investor numbers approaching 10 million, yet trading increasingly occurs outside the regulatory framework.

The consequences are straightforward but very real:

• Domestic trading platforms stagnate
• Investors are forced to turn to overseas platforms like Binance and Bybit
• Risks and capital outflows occur simultaneously, with regulation struggling to keep up

Under this structure, maintaining “institutional exclusion” is no longer prudent but amplifies systemic vulnerabilities. Now, with domestic compliant channels reopening, the previously forced capital outflows have, for the first time, seen the possibility of returning.

From “Blocking” to “Facilitating”

More noteworthy is that this is not an isolated policy adjustment.

Recently, the Korean Ministry of Finance has explicitly stated that it will promote the launch of spot crypto ETFs. From discussions on stablecoins, to allowing institutional holdings, to laying the groundwork for standardized investment products, regulatory logic is clearly shifting.

When listed companies are permitted to directly allocate crypto assets, and compliant, regulated, and settlement-ready financial products are being prepared in tandem, the signal is very clear: Regulators are no longer primarily concerned with “whether to allow institutional entry,” but with “how to keep institutions within the system.”

This means Korea is building a comprehensive pathway for institutional participation: from direct holdings, to standardized products, to compliant trading and settlement systems, moving away from scattered, passive case-by-case handling.

What has truly changed is not Korea’s attitude towards crypto assets per se, but that regulators have finally acknowledged: this market can no longer be excluded from the institutional framework.

As listed companies, professional institutions, and compliant investment channels begin to align, the role of crypto assets in Korea is also changing—they are no longer just a tolerated gray market but are being formally integrated into the financial system as a manageable, constrained, and recognized asset class.

This process did not come early, but at least, it has finally begun.

The content of this article is for informational purposes only and does not constitute investment advice. The market carries risks; invest cautiously.