South Korea -- Custody Regulations Regulatory Overview

South Korea's cryptocurrency custody regulations are governed primarily by the Act on the Protection of Virtual Asset Users (effective July 2024) and are enforced by the Financial Services Commission (FSC) and Financial Supervisory Service (FSS), with oversight from the Korea Financial Intelligence Unit (KoFIU) and Korea Internet Security Agency (KISA).[3]

Key Custodial Requirements

Asset Segregation and Real-Name Accounts Virtual asset service providers (VASPs) must use real-name bank accounts for all transactions to enhance transparency and protect customer assets.[3] Authorities have implemented an unprecedented 5-minute asset reconciliation system that automatically verifies exchange ledgers against actual blockchain assets, with immediate alert mechanisms for any discrepancies.[2] This represents a dramatic escalation from previous practices where some exchanges performed reconciliations only daily or weekly.[2]

Insurance and Security VASPs are required to enroll in insurance coverage to protect against hacking incidents.[3] Additionally, all exchanges must obtain mandatory Information Security Management System (ISMS) certifications issued by KISA to operate legally.[3]

Registration and Compliance All VASPs must register with the Korea Financial Intelligence Unit (KoFIU) and implement strict Know Your Customer (KYC) procedures.[3] The KoFIU oversees anti-money laundering compliance across all service providers.[3]

Custody Infrastructure Development

The National Police Agency has completed a draft directive establishing compliance guidelines for handling seized cryptocurrencies, including requirements for software wallet management and private key handling.[1] The KNPA plans to select a private custody provider within the first half of 2026, following three unsuccessful bidding rounds in 2025.[1]

Pending Custody Legislation

The proposed Digital Asset Basic Law (introduced by South Korea's ruling Democratic Party) aims to create a comprehensive legal framework covering issuance, trading, custody, and regulation of digital assets.[4] The law will require licensing for custodians and establish special committees to evaluate products and monitor abnormal transactions.[4] This legislation aligns with global regulatory efforts and is scheduled for National Assembly presentation in early 2026.[5]

Note: The search results do not contain specific numerical thresholds for cold storage mandates, detailed qualified custodian definitions, or bonding requirements beyond the insurance provisions mentioned.