South Korea Considers Separate Crypto Custody Regulations

South Korea's financial regulator is exploring separate regulations for cryptocurrency custody services. The Financial Services Commission (FSC) aims to establish a framework that would allow corporate and institutional investors to buy and sell digital assets, while ensuring customer protection.

The FSC's Virtual Asset Division Director, Kim Sung-jin, stated that classifying custody as a separate business is 'little room for disagreement.' The regulator is studying various approaches to entry requirements and business conduct rules, including how crypto custodians should be positioned alongside traditional trust businesses.

Kim said the commission was examining the European Union's approach to assessing whether different regulatory systems provide functionally equivalent protections. However, he noted that few overseas jurisdictions have forcibly separated exchange custody operations into separate companies.

The proposed framework comes as the government works on guidelines allowing listed companies and professional investors to buy and sell crypto assets. Industry representatives urged the government to establish an independent custody framework before fully opening the market to companies, arguing that the current exchange-centred structure was insufficient to support taxation, anti-money laundering controls, and external audits.