South Korea Opens Crypto Market to Institutions: The Next Frontier – Is an ETF on the Horizon?

Main Points:

• The Financial Services Commission (FSC) has begun easing its de facto ban on institutional crypto trading, allowing non-profit organizations and virtual asset exchanges to sell digital assets under strict compliance measures.
• On June 1, 2025, World Vision Korea became the first institution to sell 0.55 ETH (roughly $1,436) on Upbit, marking a historic moment for South Korea’s crypto market. 
• Non-profit organizations must meet stringent requirements—such as five years of audited financial history and internal review committees—to qualify for crypto liquidation.
  
• The FSC plans a phased roadmap: after non-profits, the second half of 2025 will see listed companies and registered professional investors entering the market.
• South Korea’s June 3, 2025 presidential election has centered heavily on crypto policy, with leading candidates pledging to legalize spot crypto ETFs and permit pension funds to invest in digital assets. 
• Globally, spot Bitcoin ETFs debuted in January 2024 in the U.S., legitimizing the asset class and driving significant inflows. South Korea aims to follow suit, with potential local ETF approval on the horizon. 
• The inclusion of institutional players is expected to deepen market liquidity, encourage new project development, and foster practical blockchain applications across sectors like DeFi, supply chain, and healthcare.
• Investors seeking new assets and revenue opportunities should monitor evolving regulations, political developments, and strategic partnerships between exchanges and financial institutions.
• As digital asset adoption grows—over 18 million Koreans hold crypto—this regulatory shift could transform South Korea into a leading digital asset hub in Asia. 

Regulatory Shift: FSC Eases Restrictions

In February 2025, the Financial Services Commission (FSC) unveiled a “Roadmap for Corporate Participation in the Virtual Asset Market,” signaling a gradual lifting of restrictions that had effectively barred institutions from participating in crypto trading. Starting June 1, 2025, South Korean non-profit organizations—including charities, universities, and registered NGOs—were granted permission to liquidate crypto holdings through local exchanges, provided they adhere to real-name account requirements and robust Know Your Customer (KYC) and Anti-Money Laundering (AML) standards.

This policy change also allows licensed crypto exchanges to convert user-paid fees held in digital assets into fiat, subject to daily limits and strict oversight. The FSC stipulated that exchanges could only sell crypto to cover operational costs, ensuring transparency and risk mitigation. By mandating compliance with the Specified Financial Transaction Information Act and requiring real-name accounts, the FSC aims to prevent anonymous trading and align crypto transactions with Korea’s broader financial regulatory framework. 

The rationale behind this shift is twofold: first, recognizing that non-profits often receive donations in digital currencies and need legal avenues to convert these assets for operational use; second, laying the groundwork for broader institutional adoption. Although the FSC had previously guided banks to withhold real-name accounts from corporations—effectively barring corporate participation—no explicit legal prohibition existed. This roadmap clarifies compliance requirements and gradually integrates institutions into the crypto ecosystem.

World Vision Korea Makes History

On June 1, 2025, World Vision Korea became the first domestic institution to conduct an on-chain-to-exchange crypto transaction following the FSC’s regulatory update. The humanitarian aid organization sold 0.55 ETH—valued at approximately 1.98 million KRW (about $1,436)—on Upbit, South Korea’s largest exchange by trading volume. This transaction marked a pivotal moment: the nation’s first institutional crypto sale since the de facto ban was imposed in 2018 and lifted in 2025. 

The Ether originated from a March fundraising campaign on Upbit, where donors contributed ETH to support underprivileged youth with essential school supplies. World Vision Korea’s chairman, Myung-hwan, held the donated Ether in his K-Bank corporate account until the sale. By linking its verified K-Bank account to Upbit, the NGO seamlessly converted the donation into Korean won on the KRW market. The proceeds—about $1,436—were then channeled into the organization’s relief efforts.

Upbit’s parent company, Dunamu, emphasized its intent to support non-profit institutions converting crypto donations while adhering to guidelines established by financial authorities. Under the new rules, non-profits must maintain an internal Donation Review Committee to assess each crypto contribution’s origin, valuation, and liquidation strategy. This oversight framework aims to foster a “healthy virtual asset donation culture” and prevent misuse of funds.

Industry analysts view World Vision Korea’s sale as a bellwether for broader institutional engagement. Although trading volume on Upbit fell by 34%—from $561.9 billion in Q4 2024 to $371 billion in Q1 2025—a degree of market stabilization is expected as institutions add liquidity and credibility to the market. With an estimated 18 million Korean crypto investors—roughly one-third of the population—the entry of respected institutions could catalyze renewed retail interest and reduce volatility. 

Criteria and Requirements for Nonprofits

The FSC’s roadmap imposes rigorous requirements on non-profit organizations seeking to liquidate crypto holdings. First, the non-profit must possess at least five years of audited financial history, demonstrating operational transparency and fiscal responsibility. This requirement ensures that only established, reputable entities can participate, minimizing the risk of fraudulent or politically motivated transactions. 

Second, each non-profit must establish an internal Donation Review Committee tasked with vetting incoming digital asset donations. The committee must evaluate the donation’s origin—ensuring no links to illicit activities—and determine the optimal timing and method of liquidation to maximize value while mitigating market impact. Draft guidelines from the FSC specify that this committee should include members with expertise in finance, compliance, and digital asset markets. 

Third, all transactions must occur through real-name accounts registered under the Specified Financial Transaction Information Act. Under this law, banks can issue corporate real-name accounts to qualified institutions—non-profits, universities, and licensed exchanges—but had been previously instructed to withhold them from most corporations. Now, non-profits meeting the five-year audit requirement can obtain these accounts to facilitate transparent on-chain to exchange transfers. 

Finally, exchanges are permitted to liquidate user fees paid in crypto, but only within daily caps set by the FSC. These caps are designed to ensure liquidity management and prevent sudden large-scale sell-offs that could destabilize the market. Exchanges must report monthly on their fee liquidations, providing data on the volume, fiat conversion amount, and remaining crypto reserves. This reporting requirement is integral to the FSC’s oversight and aims to build public trust in Korea’s digital asset infrastructure. 

Roadmap for Institutional Participation

While non-profits and licensed exchanges represent Phase 1 of the FSC’s roadmap, Phase 2—set for the latter half of 2025—will extend market access to publicly listed companies and entities registered as professional investors. These institutions include pension funds, asset managers, hedge funds, and corporations meeting specific compliance thresholds. The FSC’s goal is to create a phased entry that allows regulators to monitor market stability, adjust policies based on real-time data, and ensure a secure environment for broader participation.

Publicly listed companies must demonstrate adherence to corporate governance norms and maintain a baseline of market capitalization—criteria still under discussion but expected to mirror standards used for foreign direct investment. Professional investors—such as licensed asset managers and hedge funds—must register with the FSC’s Virtual Asset Committee and meet capital adequacy ratios consistent with those required in traditional financial markets. This ensures that institutions have sufficient risk capital to participate in the volatile crypto sector without jeopardizing wider financial stability. 

The FSC’s phased approach draws inspiration from global precedents. In the United States, the SEC approved spot Bitcoin ETFs in January 2024, after initially rejecting multiple proposals. This approval was contingent on issuers meeting custody requirements, third-party auditing, and market surveillance agreements—measures South Korean regulators are studying closely. By allowing institutions to create real-name accounts first, then gradually widening access, South Korea aims to replicate the U.S. model’s success without inheriting its early volatility spikes, which saw Bitcoin’s price swing by over 15% within days of ETF launch. 

Importantly, South Korea’s roadmap includes provisions for ongoing regulatory reviews. The FSC will convene quarterly consultations with industry stakeholders—exchanges, institutional investors, and consumer advocacy groups—to evaluate compliance outcomes and market dynamics. Should systemic risks emerge, the FSC retains discretionary power to tighten real-name account requirements, adjust daily liquidation caps, or impose additional reporting obligations. Conversely, if market conditions remain stable, the FSC may accelerate Phase 3, which could involve permitting derivative trading, cross-border crypto investment, and integration with traditional financial products like futures and structured notes. 

Political Backdrop: Election and Pro-Crypto Pledges

South Korea’s June 3, 2025 presidential election became a watershed moment for digital asset policy. Both leading candidates—Lee Jae-myung of the Democratic Party of Korea (DPK) and Kim Moon-soo of the People Power Party (PPP)—made pro-crypto reforms central to their campaigns. With 18 million Koreans owning crypto accounts, political platforms that address digital assets could sway a significant voter bloc. 

Lee Jae-myung pledged to legalize spot crypto ETFs, allow government pension funds (e.g., National Pension Service) to invest in digital assets, and introduce a won-backed stablecoin to minimize capital flight to USD-denominated stablecoins. He argued that these measures would enhance transparency, reduce trading fees, and expand retail participation in a regulated environment. Lee’s camp emphasized that crypto adoption—supported by institutional participation—could drive innovation in DeFi, NFT, and blockchain-based supply chain solutions.

Kim Moon-soo similarly endorsed spot crypto ETFs and proposed dismantling the “one exchange, one bank” rule—allowing exchanges to partner with multiple banks to facilitate fiat-crypto conversions. He also offered tax relief for small-scale investors and entrepreneurs launching blockchain startups. Kim’s platform included a commitment to lower inheritance tax rates and offered to include crypto-linked assets under tax-advantaged accounts. Both candidates argued that a unified, crypto-friendly regulatory framework would attract foreign direct investment and position South Korea as a regional financial hub.

The election’s outcome—Lee Jae-myung’s decisive victory—signaled continuity in pro-crypto policy. In his post-election address, President-elect Lee reiterated plans to collaborate with the FSC and financial institutions to expedite spot ETF approvals by late 2025 or early 2026. He also announced a task force to explore blockchain applications in government services—ranging from land registry digitization to transparent voting platforms. President Lee’s administration has already initiated dialogues with leading domestic exchanges (e.g., Upbit, Bithumb) and global custody providers (e.g., Coinbase, BitGo) to design a secure, onshore custody framework for institutional clients. 

Implications for the Market and Investors

The entry of institutional players is poised to transform South Korea’s crypto market dynamics. First, increased liquidity from large buy-side orders—such as pension fund allocations or corporate treasury diversifications—should mitigate extreme price swings, creating a more stable trading environment. Second, institutions typically demand rigorous risk management protocols, including insurance, multi-signature wallets, and third-party audits, which could elevate the overall security standards across the industry.

Third, institutional involvement often brings advanced market infrastructure—such as dark pools, algorithmic trading desks, and over-the-counter (OTC) desks—which could attract high-net-worth investors and family offices. With professional market makers and arbitrageurs operating in the Korean market, bid-ask spreads are likely to narrow, reducing transaction costs for retail traders. Furthermore, institutional research teams may produce in-depth reports on blockchain projects, tokenomics, and network economics, helping to identify promising new tokens beyond Bitcoin and Ethereum—potentially boosting altcoin diversity within Korea’s ecosystem. 

Fourth, the institutional endorsement of crypto assets could catalyze partnerships between domestic banks and exchanges. Should banks begin offering custody services—leveraging their existing trust and compliance expertise—clients would gain access to insured wallets and embedded payment rails, simplifying fiat-to-crypto onboarding. This integration could enable seamless remittance services, cross-border settlements, and programmable payments for merchants, thereby encouraging merchants to accept crypto as a payment option. Over time, such real-world use cases—ranging from e-commerce to supply chain finance—could substantiate crypto’s utility beyond speculative trading.

Finally, as spots ETFs approach legalization, asset managers may launch thematic funds focused on blockchain infrastructure, decentralized finance protocols, and emerging token economies within sectors like gaming, decentralized storage, and healthcare. These funds could attract capital from both domestic and international investors seeking diversified exposure to the digital asset class. With regulatory clarity, institutions may also explore launching crypto-linked bonds or structured products that combine fixed-income and token exposure—innovations that could appeal to conservative investors seeking incremental yield.

Global Context and Recent Trends

South Korea’s regulatory pivot occurs against a backdrop of institutional adoption worldwide. In the United States, the Securities and Exchange Commission (SEC) approved the first spot Bitcoin ETFs on January 10, 2024, after years of petitions and litigation. BlackRock’s Bitcoin ETF (IBIT), launched in January 2024, amassed over $10 billion in assets within its first four months, illustrating investor demand for streamlined access to Bitcoin without direct custody. 

The U.S. ETF approvals incorporated stringent safeguards, including independent custody by regulated trust companies, third-party auditing, daily NAV calculations, and market surveillance agreements with established exchanges. These measures reassured regulators that ETF sponsors would prevent market manipulation and protect retail investors. As a result, Bitcoin’s price surged above $100,000 in late 2024, buoyed by inflows exceeding $2 billion per week into Bitcoin spot ETFs. The success of these products prompted expansion into Ethereum-based spot ETFs—ProShares and VanEck launched their first ETH spot ETFs in October 2023, further legitimizing the wider digital asset class.

Canada, through the Toronto Stock Exchange, blazed a similar trail in 2021 by approving the first Bitcoin ETF (Purpose Bitcoin ETF) and subsequent Ethereum and multi-asset ETFs. Canada’s retail-friendly tax treatment for crypto capital gains and lower listing hurdles facilitated rapid growth. By May 2025, Canadian exchanges listed over ten crypto ETFs, collectively holding more than CAD 5 billion in assets. These international precedents underscore how ETF vehicles can attract institutional capital and standardize crypto as part of diversified portfolios.

In Asia, Japan’s Financial Services Agency has permitted crypto-based investment trusts since 2022, subject to stringent custody rules and leverage limits. Singapore—through the Monetary Authority of Singapore (MAS)—has introduced licensed Digital Asset Service Provider (DASP) frameworks that allow crypto exchanges and custodians to operate under a robust regulatory umbrella. Hong Kong’s Securities and Futures Commission (SFC) launched a trial for Bitcoin and Ethereum ETFs in early 2025, with several issuers awaiting full approval. These regional developments create a competitive landscape where South Korea must balance innovation with investor protection to remain a hub for digital asset innovation. 

Globally, decentralized finance (DeFi) protocols have matured, with total value locked (TVL) across DeFi reaching $150 billion by mid-2025—up from $50 billion at the start of 2024. DeFi applications—ranging from automated market makers (AMMs) to lending platforms—are increasingly institutionalized through wrapped tokens and tokenized debt instruments. South Korean institutions, once permitted to hold crypto, could begin participating in DeFi with on-ramps via regulated custodians, driving further integration between traditional finance (TradFi) and decentralized protocols.

Opportunities for Crypto Enthusiasts and Businesses

For individuals and enterprises seeking new revenue sources or blockchain use cases, South Korea’s regulatory liberalization presents multiple opportunities:

1. Token Launch Platforms: With institutions entering the market, demand for robust token launchpads—offering compliant token issuance, KYC integration, and investor accreditation—is likely to surge. Startups can build platforms that facilitate security token offerings (STOs) and compliant initial coin offerings (ICOs), catering to both retail and institutional investors under FSC guidelines. 
2. Compliance and Audit Services: As institutions meet stringent AML/KYC requirements—maintaining real-name accounts and extensive transaction logs—there will be demand for third-party compliance auditors, risk assessment firms, and blockchain analytics providers. These services can help institutions detect suspicious transactions, assess smart contract risks, and ensure regulatory adherence. 
3. Custody and Security Solutions: Domestic banks and financial institutions are expected to develop integrated custody solutions combining cold storage, multi-signature wallets, and insurance against theft or hacking. Partnerships between exchanges and traditional banks can create insured custody vaults, where institutional clients can securely hold large volumes of crypto assets while meeting regulatory capital requirements.
   
4. DeFi Integration: With potential institutional access to on-chain liquidity, DeFi protocols—such as decentralized lending (Aave, Compound) and automated market makers (Uniswap, Curve)—could onboard institutional liquidity pools. Enterprises can develop bridges between regulated custodians and DeFi protocols, enabling institutions to earn yield on idle treasury reserves while staying within compliance frameworks. 
5. Blockchain-as-a-Service (BaaS): Corporations exploring private or consortium blockchains—such as Hyperledger Fabric or Ethereum-based private networks—can offer BaaS solutions to streamline supply chain tracking, digital identity, and trade finance. As institutional players gain legitimacy, enterprise blockchain use cases in industries like logistics, manufacturing, and healthcare will receive greater investment.
   
6. Financial Products and Derivatives: Asset management firms can create crypto-linked structured products—combining traditional bonds with embedded token derivatives. With the likely approval of spot ETFs, derivative exchanges could launch Bitcoin and Ethereum futures, options, and perpetual swaps, providing hedging tools for institutional participants. Firms designing algorithmic trading strategies, volatility products, or cross-asset arbitrage models will find fertile ground.
7. Educational and Advisory Services: Institutional adoption demands that corporate boards, compliance officers, and treasurers understand crypto intricacies. Advisory firms and educational platforms can offer tailored training—covering blockchain fundamentals, regulatory frameworks, tax implications, and custody best practices. Workshops, seminars, and certification programs will help institutions build internal expertise and mitigate operational risks. 
8. Payment and Remittance Solutions: With banks partnering with crypto exchanges, enterprises can offer cross-border payment services leveraging the speed and cost advantages of blockchain. Payment gateways integrating on-ramp/off-ramp services—allowing merchants to accept crypto and automatically settle in KRW—can streamline e-commerce and B2B transactions. Remittance startups can tap into institutional liquidity to offer lower fees and faster settlement times for migrant workers and international trade. 

Practical Blockchain Applications Emerging in Korea

South Korea’s embrace of institutional crypto not only benefits trading but also accelerates practical blockchain deployment across sectors:

• Supply Chain Transparency: Companies in automotive, electronics, and food industries can leverage permissioned blockchain networks to track products from origin to consumer. Institutional capital can fund pilot programs integrating IoT sensors with blockchain to monitor temperature, location, and authenticity—ensuring compliance with quality standards. 
• Healthcare Data Management: Hospitals, insurers, and pharmaceutical firms can adopt blockchain for secure patient record management and drug supply verification. With institutional support, consortiums can establish HIPAA-compliant frameworks (or Korea’s Health Insurance Portability and Accountability Act equivalent), enabling patients to control access to medical data while improving care coordination.
  
• Digital Identity and KYC: Government agencies and private enterprises can collaborate to build blockchain-based digital identity systems, reducing duplication and fraud. Verified identity avatars stored on-chain—combined with institutional verification—can streamline KYC for financial services, e-government portals, and e-commerce platforms. 
• Real Estate Tokenization: Real estate firms can issue security tokens representing fractional ownership of properties, enabling wider investor participation. Institutional investors could provide liquidity pools, while property developers create tokenized bonds—paying rent distributions via smart contracts. This democratization of real estate investment could boost market efficiency and price discovery.
  
• Decentralized Energy Trading: Energy providers and municipalities can pilot blockchain-based microgrid projects, where households generate renewable energy and trade surplus electricity via tokenized credits. With institutional funding, these projects can scale rapidly, addressing reliability and sustainability goals.
• Gaming and NFTs: South Korea’s robust gaming industry can integrate non-fungible tokens (NFTs) to represent in-game assets, digital collectibles, and esports memorabilia. Institutional interest can support NFT marketplace infrastructure, secure custody solutions, and interoperability standards—spurring the growth of play-to-earn and metaverse ventures.
  

As institutions gain confidence and regulatory clarity, these blockchain applications—once seen as niche—are poised for mainstream adoption. Collaborations between universities, research institutes, and private enterprises will likely yield innovative use cases, while institutional capital reduces funding barriers for startups experimenting with novel DLT frameworks.

Future Outlook and the Potential ETF Landscape

With South Korea’s institutional market set to open in H2 2025, attention has turned to spot crypto ETF approvals. Private discussions between President Lee’s administration, the FSC, and domestic exchanges indicate that regulatory frameworks are being drafted for ETF sponsors—likely including requirements for audited custody, market surveillance agreements, and periodic reporting to prevent fraud. A proposed timeline suggests that spot Bitcoin and Ethereum ETFs could be listed on the Korea Exchange (KRX) by Q1 2026, aligning with global trends. 

The success of U.S. and Canadian ETFs provides a roadmap: custodians must hold underlying assets in segregated trust accounts, sponsors must engage independent auditors to verify holdings daily, and market surveillance agreements with major global exchanges—such as Nasdaq or CME—are required to detect manipulation. ETF issuers envision passive funds tracking not only Bitcoin but also a diversified basket of top cryptocurrencies—likely including Ethereum, Binance Coin (BNB), and Solana (SOL)—offering institutional-grade exposure within a single vehicle.

Moreover, South Korea’s robust ETF infrastructure—boasting over KRW 300 trillion in assets under management—means that local investors are already accustomed to ETF mechanics. As a result, listing spot crypto ETFs may see rapid uptake, especially if initial expense ratios are competitive (<0.5%) and minimum investment thresholds are low. Some industry insiders predict that within six months of launch, crypto ETFs could attract over KRW 1 trillion in inflows from retail and institutional investors combined. 

Beyond spot ETFs, futures-based and leveraged ETF variants may follow. The Korea Exchange currently offers derivative contracts on traditional indices—adding crypto futures would require coordination with the Financial Supervisory Service (FSS) and the FSC to ensure appropriate margin requirements and clearing safeguards. Institutional demand for yield products may also lead to structured notes that combine fixed-income yields with crypto upside, providing risk-averse investors with controlled exposure. 

On the policy front, tax frameworks will play a critical role. South Korea’s 2025 capital gains tax implementation—originally set to tax crypto profits—was deferred pending legislative clarity. President Lee’s administration has signaled intent to revise crypto tax laws, potentially exempting small-scale retail gains (< KRW 30 million per year) and offering tax credits for institutional allocations to blockchain research initiatives. These fiscal incentives aim to stimulate R&D in decentralized technologies, positioning Korea as a global innovation hub.

Finally, cross-border collaboration with Japanese and Singaporean regulators could harmonize standards for digital asset products. A trilateral working group, proposed at the Asia Blockchain Forum 2025, seeks to develop common due diligence frameworks for ETF sponsors, custodians, and auditing firms. This regional cooperation could facilitate the listing of crypto ETFs simultaneously in Seoul, Tokyo, and Singapore—drawing institutional capital flows from across Asia.

Conclusion

South Korea’s decision to open its crypto market to institutional players marks a transformative moment in the evolution of digital assets within Asia. The FSC’s phased roadmap—beginning with non-profits and exchanges and expanding to listed companies and professional investors—provides a structured and regulated environment that balances innovation with investor protection. World Vision Korea’s historic sale of 0.55 ETH on Upbit underscores both the market’s potential and the stringent requirements imposed to ensure transparency and compliance.

With both presidential candidates championing pro-crypto reforms—legalizing spot ETFs, allowing pension fund allocations, and facilitating stablecoin issuance—political will appears aligned with market development. The anticipated listing of spot crypto ETFs by early 2026 could parallel global successes seen in the U.S. and Canada, attracting institutional inflows and legitimizing digital assets as part of diversified portfolios.

Moreover, institutional entry is expected to catalyze the growth of practical blockchain applications across supply chain, healthcare, finance, and gaming sectors. Startups developing token issuance platforms, compliance and audit services, custody solutions, and DeFi integrations stand to benefit from increased liquidity and credibility. As banks and exchanges collaborate to offer seamless on-ramps, retail investors and small businesses will gain easier access to emerging token economies, accelerating mainstream adoption. 

Looking ahead, the synergy between regulatory clarity, political support, and global market trends suggests that South Korea is well-positioned to become a leading digital asset hub. With over 18 million crypto investors and robust institutional infrastructure, the country can leverage its technological prowess and financial expertise to foster a thriving ecosystem. For readers seeking new crypto assets, revenue streams, and practical blockchain use cases, South Korea’s unfolding narrative offers both inspiration and actionable opportunities. The next chapter—spot ETF approvals and deeper institutional participation—promises to reshape the region’s financial landscape, blending innovation with stability in the fast-evolving world of digital assets.