South Korea Finally Lets Corporations Buy Crypto After Nine-Year Freeze

TLDR:

• South Korea ends nine-year corporate crypto ban, permits 5% equity allocation to Bitcoin and Ethereum
• Major firms like Naver could deploy trillions of won into Bitcoin under new investment guidelines
• Regulators limit investments to top 20 cryptocurrencies by market cap on domestic exchanges only
• Industry criticizes 5% cap as US and Japan maintain no restrictions on corporate crypto holdings

South Korea has officially ended its nine-year prohibition on corporate cryptocurrency holdings. 

Listed companies and professional investors can now allocate up to 5% of their equity capital to digital assets like Bitcoin and Ethereum. The Financial Services Commission shared new trading guidelines with a public-private task force on January 6. 

Approximately 3,500 corporations are expected to participate once regulations take effect.

South Korea Corporate Bitcoin Investment Guidelines Take Shape

According to a report, the regulatory framework limits annual deposits to 5% of equity capital for risk management purposes. 

Investment targets include the top 20 cryptocurrencies by market capitalization as listed on five major domestic exchanges. Financial authorities are still deliberating whether to include dollar-based stablecoins like USDT in permitted assets. The government plans to establish standards for fractional trading and large orders to prevent excessive market volatility.

A senior financial industry official confirmed the timeline for implementation. Authorities will release final guidelines between January and February 2025. 

Corporate trading for investment and financial purposes will begin after the Framework Act on Digital Assets passes in the first quarter. Listed companies and registered professional investors should gain market access within the year.

The 2017 ban stemmed from money laundering concerns and market overheating fears. 

South Korea joins global markets in permitting institutional crypto participation. The United States and Japan impose no restrictions on corporate digital asset investments.

The European Union and Singapore also allow broad corporate cryptocurrency allocations without percentage caps.

Market Impact and Corporate Participation Potential

Major corporations could deploy significant capital under the new rules. 

Naver holds 27 trillion won in equity capital as of September 2024. A 5% allocation would enable the tech giant to acquire over 10,000 Bitcoin at current prices around 130 million won per coin. Financial institutions expect tens of trillions of won to enter the domestic market.

The domestic cryptocurrency market exceeded 10 million investors in the first half of 2024. 

However, 76 trillion won flowed out of the country during the same period. Individual investors comprise nearly 100% of market participants, driving speculative behavior. Altcoins represent approximately twice the market capitalization percentage compared to overseas markets.

Industry participants welcome the regulatory shift but question the 5% limitation. 

A financial sector insider noted that investment caps do not exist in competing markets. The restriction could limit fund inflows and prevent specialized cryptocurrency investment firms from emerging. Corporate entry is expected to reduce speculative demand and establish long-term investment foundations.

The regulatory approval accelerates the development of won-denominated stablecoins and Bitcoin spot ETFs. Corporations bring substantial financial resources and risk management expertise to the market. 

Exchange operators selected assets within the top 20 by market cap on a semiannual basis. Financial authorities designed the framework to minimize volatility while enabling institutional participation.

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