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Crypto Law/Level VIII · Around the world/8.3 Asia and the Gulf/Lesson 3

South Korea

South Korea’s two-step build of crypto law, from anti-money-laundering registration in 2021 to the 2024 user protection act, plus the long-delayed 22% tax and the Terra and Upbit cases.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Under the current schedule, individuals’ crypto trading gains are not taxed under the virtual-asset regime until it starts on 1 January 2027. Catch: the start has been postponed three times and a further delay petition is pending, so check the date before acting.
  2. From 2027, the 22% tax (20% national plus 2% local) applies only to annual gains above a 2.5 million won basic deduction. Catch: the deduction is annual, so spreading disposals across years uses it more than once.
  3. Trade only through a provider reported to KoFIU with a real-name bank account, where the 2024 user protection act segregates deposits and requires insurance or reserves. Catch: unreported operators face up to five years’ imprisonment, and their customers lose these protections.
  4. Start keeping cost records for every token now, so gains can be computed once the tax starts. Catch: the National Tax Service is due to publish detailed standards, so the computation method may still change.

MaterialsThe Act on the Protection of Virtual Asset Users (Act No. 19563), English text on the Korea Legislation Research Institute siteThe Financial Services Commission’s press releases on virtual asset rulesAn annual statement of gains and losses from each Korean exchange account used

Wonder

  1. Why can Koreans trade crypto only through real-name bank accounts?
  2. When will South Korea actually start taxing crypto gains?
  3. What happened to the people behind Terra and Luna, and did Korean law reach them?

Explore

  1. South Korea built its crypto law in two steps. The first was anti-money-laundering. An amendment to the Act on Reporting and Using Specified Financial Transaction Information took effect on 25 March 2021 and required virtual asset service providers (VASPs) to report to the Korea Financial Intelligence Unit (KoFIU). A report could be refused without an information security certification (ISMS) and a real-name verified deposit and withdrawal account at a bank. Existing businesses had until 24 September 2021; 42 filed by that deadline. Operating without reporting can bring up to five years’ imprisonment or a fine of up to 50 million won.
  2. The second step was the Act on the Protection of Virtual Asset Users (Act No. 19563), enacted on 18 July 2023 and in force from 19 July 2024. Under Article 6, customer deposits must be segregated and placed with a custodian such as a bank. Under Article 7, the provider must keep users’ virtual assets separate from its own and hold a portion offline, as set by Presidential Decree. Providers must be insured against hacking and system failures or set aside reserves. They must also run constant surveillance for suspicious trading and report it to the Financial Supervisory Service. Token issuance and stablecoins are left to the second-phase bill described below.
  3. The Act also created a market-abuse offence for crypto, covering unfair trading such as price manipulation. Under Article 19, a violator faces imprisonment with labour for at least one year, or a fine of three to five times the profit made or loss avoided, with heavier sentences where the gains are large. Penalty surcharges and administrative fines sit alongside the criminal route. For anyone running market-making, listing or promotion work that touches Korean users, this means trading conduct is now policed like a financial market rather than left to general fraud law alone. Exchanges must report suspicious trades, so manipulation is more likely to be detected.
  4. Tax is the unfinished part. Korean law provides for a 22% tax, 20% national plus 2% local, on annual gains from virtual assets above a basic deduction of 2.5 million won. It has been postponed three times, and the current start date is 1 January 2027. In September 2026 a public petition asking for a further two-year delay passed 50,000 signatures, which triggers parliamentary review, while the economy and finance minister’s nominee said the plan was on schedule and that the National Tax Service would publish detailed standards in 2026. Until it starts, an individual’s crypto trading gains are not taxed under this regime.
  5. Two enforcement stories show Korean exposure. Terraform Labs, co-founded by the Korean national Do Kwon, saw its TerraUSD stablecoin and Luna token collapse in May 2022, wiping out about $40 billion. Kwon was extradited from Montenegro to the United States on 31 December 2024, pleaded guilty in August 2025 and was sentenced in New York on 11 December 2025 to 15 years. At home, KoFIU imposed a three-month partial suspension on Dunamu, operator of the Upbit exchange, on 25 February 2025, restricting new users’ transfers. On 9 April 2026 the Seoul Administrative Court cancelled it, finding the rules for smaller transfers were not specific enough.
  6. Korea’s next step is pending. The ruling Democratic Party proposed a Digital Asset Basic Act in June 2025 to cover token issuance, exchange licensing and won-denominated stablecoins. In December 2025 it was reported delayed by disputes over who may issue stablecoins, and in August 2026 lawmakers said they expected passage in the second half of the year. As of October 2026 treat it as a bill, not law. A practical check: confirm that any exchange used appears among the providers reported to KoFIU, keep cost records for every token from now, and watch whether the 1 January 2027 tax start survives the delay petition.

Key facts

  • South Korea’s amended Act on Reporting and Using Specified Financial Transaction Information took effect on 25 March 2021, with existing VASPs given until 24 September 2021 to report.
  • South Korea’s Act on the Protection of Virtual Asset Users (Act No. 19563) took effect on 19 July 2024.
  • Article 19 of the Korean user protection act punishes unfair trading with at least one year’s imprisonment or a fine of three to five times the profit gained or loss avoided.
  • South Korea’s 22% tax on annual virtual asset gains above 2.5 million won is scheduled to start on 1 January 2027 after three postponements.
  • Do Kwon was sentenced to 15 years in prison by a US federal court in New York on 11 December 2025.
  • The Seoul Administrative Court cancelled the FIU’s three-month partial suspension of Upbit’s operator Dunamu on 9 April 2026.

Exercise nine, six, three, one

9CollectList up to 9 things a Korean crypto user relies on: exchange, bank account link, custody, listing decisions, transfers abroad, records, and so on.
6ClusterSort them into 6 groups: anti-money-laundering registration, deposit protection, custody of tokens, market abuse protection, tax records, and areas still waiting for new law.
3DistillReduce the 6 to 3 protections that would matter most if the exchange failed tomorrow.
1CrystallizeWrite 1 sentence on what the 2024 user protection act changed for a Korean exchange customer.

Fact check

Dates, figures and claims checked against the published sources listed below.

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