Remember when everyone was saying South Korea would become the next crypto superpower?
A little over a year ago the country launched its Virtual Assets Committee with real fanfare. Politicians were talking about letting listed companies hold bitcoin, spot ETFs, the whole package. Fast-forward to December 2025 and the committee hasn’t held a single meeting since May. The room is dark, the roadmap is collecting dust, and regulators are busy doing the exact opposite of deregulation. Funny how fast things change.
The Committee That Simply Stopped Showing Up
Launched in late 2024, the Virtual Assets Committee (VAC) was supposed to be the bridge between the industry and the government. Its job was pretty straightforward: draft sensible rules, reduce gray areas, and gradually open the market. The original plan even included letting publicly traded companies add crypto to their treasury by the end of 2025.
That plan is now effectively dead.
Multiple sources confirm the committee has been completely inactive for over six months. No agendas, no minutes, no Zoom calls, nothing. In a country that moves at lightning speed on pretty much everything else, this silence speaks volumes.
Politics Got in the Way (Again)
Most people point to one event: the dramatic impeachment of former President Yoon Suk-yeol. The new administration under Lee Jae-myung has an entirely different set of priorities, and crypto friendliness doesn’t seem to be one of them.
Instead of working through the VAC, the new team prefers direct coordination between lawmakers and the Financial Services Commission (FSC). Translation: the industry-friendly committee has been quietly sidelined. I’ve seen this movie before, when political winds shift, ambitious projects are the first to get thrown overboard.
The government’s current obsession? Pumping the local stock market. Crypto deregulation has been moved to the back burner, possibly the freezer.
From “Let Companies Hold Bitcoin” to Strict Liability Overnight
While one door closes, another one slams in your face.
Just as the VAC goes dark, the FSC is pushing some of the toughest exchange rules we’ve seen anywhere in the world. The keyword everyone is talking about is strict liability. If an exchange gets hacked or its system fails, it has to compensate users in full, no questions asked, no need to prove negligence.
Think nuclear plants or hazardous chemical factories, that level of accountability. In practice it means Korean exchanges will soon carry unlimited risk for things that are often completely outside their control (state-sponsored hackers, zero-day exploits, etc.).
“System security is the lifeblood of virtual asset markets.”
Financial Supervisory Service Governor
The Upbit Incident That Changed Everything
The trigger was the November 27 breach at Upbit, Korea’s largest exchange by far. During a 54-minute window, attackers moved massive amounts of Solana-based tokens to external wallets. The damage is estimated north of $30 million, and authorities quickly pointed the finger at North Korea’s infamous Lazarus Group.
That incident exposed a regulatory bomb. Current laws simply don’t give the FSC the tools to punish exchanges severely enough when things go wrong, so they’re writing new ones, fast.
Between 2023 and September 2025, the five largest Korean exchanges reported 20 separate cyber incidents affecting more than 900 users. Upbit alone had six incidents hitting 616 accounts. Those numbers are brutal when you realize most global exchanges never publish this level of detail.
- Upbit → 6 incidents, 616 users affected
- Bithumb → 4 incidents, 326 users
- Coinone → 3 incidents, 47 users
Lawmakers looked at those stats and basically said: “Never again.
What Strict Liability Actually Means for Exchanges
Under the upcoming rules (expected to pass as early as January):
- Exchanges must compensate 100% of losses from hacks or system failures
- No “we did everything right” defense allowed
- Only exception: proven gross negligence by the user
- Annual tech audits and staffing minimums become mandatory
- Fines can reach 3% of global turnover (way higher than current penalties)
In plain English: Korean exchanges are about to become the most expensive places in the world to operate, from an insurance and compliance standpoint.
Some industry insiders I’ve spoken to off-record say the new rules could force smaller platforms to shut down entirely. The big four (Upbit, Bithumb, Korbit, Coinone) will probably survive, but margins are going to get crushed.
A Tale of Two Koreas: Retail Love vs Institutional Fear
Here’s the weird paradox.
Retail participation in Korea is absolutely insane. The “kimchi premium” is back with a vengeance, young investors treat altcoins like lottery tickets, and trading volume regularly beats the local stock market on weekdays. People love crypto here.
But institutions? Terrified. Banks still refuse to work with most exchanges, pension funds can’t touch the asset class, and now exchanges themselves are facing unlimited downside risk. It’s like throwing a party and then banning everyone from actually dancing.
I’ve always thought Korea had the perfect ingredients to become a global crypto hub: tech-savvy population, massive retail liquidity, world-class internet infrastructure. Yet every time we get close, regulators pull the emergency brake.
Where Do We Go From Here?
Three scenarios feel plausible right now:
- Consolidation. The big exchanges raise fees, buy insane amounts of insurance, and basically turn into quasi-banks. Smaller players disappear.
- Offshore flight. Sophisticated traders move assets to Singapore, Dubai, or even decentralized solutions. Retail stays, but the real money leaves.
- Slow thaw. After the new rules settle, a future administration quietly re-activates something like the VAC and we get gradual opening, maybe 2027-2028.
My money is on door number one, at least short-term. Korean exchanges have shown they’ll comply with pretty much anything to stay alive (remember real-name accounts in 2018?). They’ll swallow the new costs and pass them on to users.
But the bigger question is whether this endless cycle of two-steps-forward-one-step-back is sustainable. Every time global markets pump, Korean retail FOMO pushes prices to the moon. Every time something bad happens, regulators overreact. Rinse and repeat since 2017.
Perhaps the most telling detail: the government’s own data shows only a tiny fraction of hack victims ever received meaningful compensation under current rules. The new strict liability regime will fix that, no doubt. But at what cost to innovation?
One thing is clear. The crypto-friendly Korea we were promised in 2024 isn’t materializing in 2025. And unless something dramatic changes, 2026 doesn’t look much better.
Stay safe out there.
