Korean Kimchi Market Welcomes Lifting of Restrictions — Nine-Year Ban Ends, Thousands of Major Investors Prepare to Enter

After nine years of strict restrictions, South Korea’s cryptocurrency market finally welcomes a policy shift. The Korean kimchi market, once dominated by retail investors and shut out by institutions, is now facing a structural transformation. According to the latest reports from Korean media, the Financial Services Commission (FSC) plans to lift the ban on corporate cryptocurrency investments that has been in place since 2017. It is expected that approximately 3,500 listed companies and professional investors will be permitted to enter this long-isolated market.

Nine Years of Ban: How South Korea’s Kimchi Market Became a Retail-Only Arena

To understand the significance of this policy shift, we must revisit the market turmoil of 2017. That year, Bitcoin triggered a speculative frenzy in Korea, highlighting the “kimchi premium,” with retail investors rushing to buy crypto assets and ICO chaos rampant. Fearing the situation, regulators swiftly took strong measures, not only restricting individual trading but also directly banning corporate and financial institution participation in crypto investments—this ban lasted for nine years.

This ban profoundly changed the DNA of South Korea’s crypto market. Over the years, the market’s trading entities have been almost entirely filled by retail investors. Large corporate funds and institutional investors have been kept outside the market, resulting in limited trading volume and low activity in the Korean crypto scene. In stark contrast to mature global markets, companies with substantial digital asset needs have had to seek investment opportunities abroad.

Now, as the global crypto ecosystem matures and institutionalization accelerates, Korean regulators are increasingly aware that maintaining the ban will only cause the country to fall behind. The government has even explicitly included digital assets in its future financial landscape in the “2026 Economic Growth Strategy,” signaling a clear policy shift.

Details of the New Regulations: 3,500 Companies Will Be Allowed In

The new guidelines proposed by the FSC essentially extend and deepen the “Virtual Asset Market Promotion Plan” from February last year. According to disclosures from Seoul Economic Daily, eligible listed companies and professional investors will be allowed to enter the crypto market, with a maximum of 5% of their net assets invested in cryptocurrencies annually.

The regulations specify the investment scope: companies are limited to purchasing the top 20 cryptocurrencies by market cap, focusing on liquid and large-scale assets like Bitcoin and ETH. The ranking will be published biannually by DAXA, an alliance of Korea’s five major crypto exchanges, ensuring authoritative and real-time data.

On the trading execution front, the new rules require exchanges to adopt splitting and batch execution strategies for large orders and set limits on individual order sizes. This mechanism aims to prevent large institutional trades from impacting the market and causing price volatility, while also monitoring abnormal trading to prevent manipulation. This reflects a cautious approach by regulators even as they open the market.

Notably, the FSC plans to announce the final guidelines as early as this month or next month. If implemented smoothly, corporate and institutional crypto trading could officially commence before the end of the year.

Institutional Entry: South Korea’s Kimchi Market Will Welcome a New Pattern

What will happen to the Korean crypto market once institutional access is granted? The numbers tell a compelling story. Take Naver, the Korean internet giant preparing to acquire the parent company of Upbit, as an example. Its book value reaches 27 trillion KRW, and with a 5% cap, it could theoretically purchase about 10,000 Bitcoin. Once such massive institutional funds enter, it will significantly boost liquidity and trading depth in the domestic market.

Industry insiders expect that, post-lifting of restrictions, Korean capital currently observing from overseas markets will flow back through legal channels into the domestic crypto scene. The potential inflow could reach tens of trillions of KRW (over a hundred billion USD). This will not only improve the long-standing liquidity issues in Korea’s kimchi market but also indirectly benefit local blockchain startups, crypto asset custody services, venture capital, and related industries.

More importantly, the influx of institutional funds will break the past nine-year retail-dominated market structure, injecting institutionalized and regulated vitality into Korea’s crypto ecosystem.

Reflecting on DAT Narratives: The Dual Challenges of 5% Cap and ETF

However, market enthusiasm for corporate token holdings strategies (DAT, Digital Asset Treasury) has cooled significantly. This strategy once sparked a global trend but now faces multiple practical challenges.

First, the policy restrictions themselves. The 5% investment cap seems lenient but actually limits the scope for corporate digital asset allocation. Compared to some overseas markets allowing higher flexibility, this ceiling will undoubtedly suppress corporate exploration.

Second, the current market situation. Aside from pioneers like MicroStrategy that have been active for years, most crypto treasury companies have suffered deep losses due to falling crypto and stock prices, causing the DAT narrative to cool down. Global investors show little interest now.

Third—and most impactful—is the widespread adoption of Bitcoin spot ETFs. As major markets push for spot ETF approvals, institutions and investors can directly participate in Bitcoin price appreciation through ETFs, avoiding the complexities and risks of direct corporate holdings. With ETFs offering a simpler and safer investment vehicle, there is little incentive for companies to pay premiums for direct holdings. Korea is also pushing for spot ETFs based on Bitcoin and other assets, which could go live soon.

Additionally, Korea’s crypto market has been cooling over the past six months, with many investors shifting to equities. On January 14, the KOSPI index broke 4,700 points intraday for the first time, with sectors like semiconductors, AI, and shipbuilding—where fundamentals are clearer—attracting far more interest than the DAT concept.

Outlook: Positive Policy Signals, but the Market Still Needs Self-Help

Although DAT faces practical challenges, Korea’s policy shift still sends a clear positive signal. Breaking the nine-year ban itself reflects a change in attitude—regulators are willing to cautiously open up while managing risks and promoting market development.

In the coming year, as the new guidelines are implemented and related laws improved, close attention should be paid to the actual investment actions of Korean companies. Whether the country can redefine market order and deepen liquidity after institutional entry will be key indicators of the success of this reform.

However, for the crypto industry itself, policy support is only a necessary condition, not sufficient. The real challenge is to strengthen the industry—by developing new narratives and value propositions—to re-engage Korean investors and attract broad global participation. The influx of institutional capital presents opportunities, but without innovation and imagination, these opportunities may be wasted.