South Korea Tightens Crypto Licensing Rules for VASPs

South Korea’s National Assembly has passed sweeping amendments to the country’s crypto licensing framework, imposing stricter entry requirements on virtual asset service providers and expanding regulatory oversight to major shareholders.

🇰🇷 South Korea is tightening crypto exchange licensing — only platforms registered as VASPs with the Financial Intelligence Unit can operate locally and stay listed on Google Play, reshaping access for overseas exchanges and boosting compliance. #Crypto #Regulation…

— Toscale.io (@toscale_io) January 28, 2026

Lawmakers approved the changes to the Act on Reporting and Using Specified Financial Transaction Information during a plenary session on Thursday. The amended law, a cornerstone of Korea’s anti-money laundering framework for digital assets, will take effect six months after enactment.

The overhaul grants the Financial Intelligence Unit broader authority to evaluate applicants. Regulators can now assess a firm’s finances, internal controls, legal history, and overall credibility before granting licenses.

Under previous rules, authorities lacked legal grounds to review whether major shareholders possessed criminal records or maintained adequate organizational structures. The new framework closes these regulatory gaps.

South Korea Expands Background Checks to Target Shareholders

The amendment introduces comprehensive vetting procedures extending beyond company executives to include controlling shareholders. Regulators will now scrutinize the backgrounds of all major stakeholders seeking to operate crypto businesses.

The list of disqualifying offenses has expanded significantly. Beyond financial crimes, the law now covers drug trafficking, tax evasion, fair-trade violations, and breaches of Korea’s crypto user protection legislation.

Individuals sentenced to fines or heavier punishments for economic crimes face automatic rejection. Those with imprisonment sentences for any legal violations, including under foreign laws, cannot participate in virtual asset business activities.

The FIU now possesses clear grounds to reject applications containing false information. Regulators can also attach conditions related to anti-money laundering compliance and user protection when accepting filings.

A new provision addresses executives who resign before sanctions are finalized. Authorities can now notify sanctions against such individuals, ensuring restrictions follow them to future financial industry positions.

Crackdown on Unregistered Exchanges Continues

The legislative action follows intensified enforcement against foreign crypto platforms operating illegally in South Korea. In March 2025, the FIU targeted exchanges including BitMEX, CoinW, KuCoin, Bitunix, and KCEX for non-compliance.

The Korea Financial Intelligence Unit (FIU) has initiated a sanction process against overseas cryptocurrency exchanges operating illegally in Korea without proper registration. The agency is considering cooperating with the Korea Communications Standards Commission to block…

— Wu Blockchain (@WuBlockchain) March 21, 2025

Authorities determined these platforms offered services without proper registration. The exchanges operated Korean-language websites and provided marketing and customer services to local investors.

The FIU initiated investigations and sought cooperation from the Korea Communications Standards Commission to block access to unregistered platforms. These exchanges face severe financial penalties and potential criminal charges.

Officials confirmed they are compiling data on investor damages linked to unregistered exchanges. Stronger inter-agency cooperation is underway, with visible enforcement actions expected before year-end.

The combined regulatory push aims to enhance market soundness and prevent crypto firms from facilitating money laundering. Korean authorities seek to establish transparent financial transaction standards across the virtual asset sector.

Major shareholders must now be included in all VASP filings under the new framework. The law defines both largest shareholders and major shareholders under a single classification for regulatory purposes.

Applicants must demonstrate sound financial conditions and social credibility. They must also prove appropriate organizational structures, personnel, IT systems, and internal control frameworks exist.

The amendments align Korea’s crypto regulations with standards applied to traditional financial institutions. Banking and insurance laws already contained similar provisions for executive sanctions and shareholder oversight.