University and Local Government Coin Transactions Possible from Next Year

Sequential Approval of Virtual Asset Legal Entity Accounts

Financial Services Commission to Release Roadmap by End of Month

Corporate and Financial Institution Approvals Under Review

From next year, it is expected that universities and local government organizations that have received donations will be able to convert these into cash. The government is preparing a plan to temporarily allow the opening of virtual asset accounts for legal entities, which have been blocked until now.

According to the Financial Services Commission on the 3rd, the Financial Services Commission plans to release a 'roadmap for allowing the opening of virtual asset accounts for legal entities' (tentative name) by the end of this month. Currently, to trade virtual assets in domestic exchanges, one must receive a real-name account linked to a bank account. Although there is no explicit regulation blocking the opening of accounts for legal entities, banks have restricted issuance based on the 'guidelines for preventing money laundering'.

The Financial Services Commission first plans to open real-name accounts for non-profit legal entities such as central government departments, local governments, public institutions, and universities (first phase). Prosecutors and the National Tax Service already hold accounts for handling confiscated or seized virtual assets. Major universities like Seoul National University hold donated virtual assets in cold storage but cannot convert them into cash due to the lack of a virtual asset account.

In the second phase, the plan is to also allow the opening of virtual asset accounts for related business operators such as virtual asset exchanges. The goal is to promote the high-level development of related industries by allowing the opening of accounts for virtual asset business operators. A Financial Services Commission official stated, "To foster and supervise the virtual asset industry and increase operational efficiency, it is necessary to segment tasks such as issuance, listing, brokerage, and custody like stocks or bonds."

The government plans to review the approval of legal entity accounts for general companies (third phase) and financial companies (fourth and fifth phases) in a medium to long-term manner. In particular, it is considering measures to ensure safety, such as requiring securities companies to hold a certain ratio of their own funds. This is to prevent side effects such as the formation of a 'Bitcoin theme stock'.

Financial companies are proposing a plan to allow the opening of accounts for the development of products related to virtual assets, rather than self-funding investment. The Financial Services Commission's decision to first allow virtual asset transactions for non-profit legal entities such as local governments, public institutions, and universities is due to the need for cash conversion rather than investment. Some departments, such as the National Tax Service and prosecutors, have been criticized for being passive in handling confiscated virtual assets through legal entity accounts. However, the delay in allowing virtual asset transactions for general companies and financial companies has raised concerns about whether Korea is falling behind.

Approval for Cash Conversion, Not Investment

According to the Financial Services Commission on the 3rd, if the 'roadmap for allowing the opening of virtual asset accounts for legal entities' (tentative name) is implemented from next year, government departments, local governments, and non-profit legal entities will be able to open accounts for virtual asset transactions. This will enable the cash conversion of confiscated or seized virtual assets.

Seoul National University is expected to be able to invest a significant amount of confiscated virtual assets received from a game company in 2022 back into school finances. Previously, Seoul National University requested the Financial Intelligence Unit (FIU) to allow the cash conversion of confiscated virtual assets received from several educational departments and the Financial Services Commission, but it was not approved by the Financial Services Commission. The value of the confiscated assets held by Seoul National University is estimated at 8 billion won.

Local governments also expressed concerns that they would be able to actively collect taxes by forcibly selling confiscated assets after processing virtual assets received from local tax collectors. Seoul City, Gyeonggi Province, and other local governments are processing confiscated virtual assets through major domestic exchanges. However, due to the lack of approval for opening accounts for virtual asset transactions, there was no way to directly sell them. A Financial Services Commission official stated, "The primary goal is to resolve situations where confiscated assets are held due to unavoidable reasons such as seizure or donation."

Government: "Difficult to Deny Reality"

The approval of virtual asset accounts for legal entities reflects the reality that the related market already exists, according to the Financial Services Commission. The Financial Services Commission has emphasized that confiscated assets are not investment assets. The fact that Donald Trump, the U.S. presidential candidate, has announced a plan to issue 1 million Bitcoin is also cited as one of the reasons why the Korean government finds it difficult to further delay the legalization of virtual assets. If the U.S. adds 1 million Bitcoin to the planned issuance of 21 million, the price could surge again. A senior official from the Financial Services Commission stated, "It is difficult to deny the reality of recognizing the asset value of virtual assets while separately denying their actual existence."

However, the policy of restricting account issuance for general companies and financial companies will be maintained. This is because there were no detailed regulations and infrastructure for allowing virtual asset transaction accounts for all legal entities. The Virtual Asset User Protection Act, which was implemented last July, requires additional legislation for risk management and accountability of exchanges, as well as penalties for unfair practices. Furthermore, there was no proper infrastructure for customer due diligence (custody) related to virtual asset investments through exchanges in Korea.

The Financial Services Commission's analysis also points out that it is cautious about the 'money move' (capital movement) in the virtual asset market. In a situation where the domestic stock market is deeply intertwined with the wealth of large domestic conglomerates like Samsung Electronics and Trump risk, there is concern that allowing virtual asset investments for general legal entities could accelerate capital outflows.

There is a lot of negative feedback from the industry and financial circles. An industry official stated, "There is a concern that the virtual asset industry will grow significantly in the U.S. after Trump's election, which has been on hold until now," and urged the Financial Services Commission to make a reasonable decision in response to changes in the global market.