Global FinTech Guide
Country Name
Korea, Republic of
ICO / token sale
Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms.  While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.


Attitude of the country towards ICOs/token sales

As explained in Sections 1.j.ii. and 1.j.iii. below, although there is no specific legal basis to support a prohibition of ICOs/token sales, since 2017, the financial regulators have taken the position that fundraising through the use of virtual assets is prohibited. To circumvent this prohibition, companies are known to conduct ICOs in foreign jurisdictions that permit ICOs, such as Singapore. In fact, according to the ICO status survey published by the financial regulators on 1 January 2019 in connection with 22 domestic companies, most of these companies had conducted ICOs abroad. In light of the target investors and the language of the white papers, the regulators found that such companies only conducted foreign ICOs in form, incorporating paper companies to bypass the ICO prohibition policy.

Legal affairs

Presence of any explicit regulation on ICOs and the issuance of token/coins

Currently, no law directly restricts or prohibits ICOs or the issuance of tokens or coins in Korea. However, depending on the facts of the particular ICO or issuance (i.e., the ICO/issuance structure, the legal nature of the token/coin, etc.), it may be necessary to review other issues, such as whether the issuer would be considered a VASP under the Specified Financial Information Act or whether the ICO or issuance would violate the FISCMA (where the token/coin is a financial investment instrument such as a security). The transaction could also be subject to fraud issues under the Criminal Act or be considered a violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission.

Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins

In a press release in September of 2017, the FSC announced that it plans to ban all forms of ICOs regardless of the technology or terminology used, due to concerns about the side effects of ICOs such as risk of fraud (including inducing investments without permission through an ICO), market melt-ups and consumer harm due to increased speculative demand. Furthermore, despite the enactment of the Specified Financial Information Act in November of 2020, the KoFIU informally expressed that it would maintain the existing de facto ICO prohibition for purposes of investor protection. While the majority view is that this government policy has no clear legal basis and should therefore be interpreted as mere administrative guidance, the government continues to take a hard-line stance. Thus, ICOs in Korea can be viewed as virtually impermissible as they very clearly go against the policy of the FSC and the KoFIU. On the other hand, with respect to the distribution of coins or tokens without the payment of consideration, such as distribution through airdrops, the financial regulators have not expressed any position to limit or ban them.

Moreover, the transfer of tokens or coins is subject to the Travel Rule under the Specified Financial Information Act. In other words, the relevant VASP must record the identity of the sender and receiver where at least KRW 1 million in virtual assets is being transmitted and file a report if money laundering is suspected based on such record. However, since this obligation is imposed on VASPs, it cannot be said that there are any particular restrictions on the transfer of tokens or coins not involving VASPs.

Obligations and requirements to issue token/coins

As mentioned above, the only law regulating virtual assets is the Specified Financial Information Act, pursuant to which VASPs are subject to certain AML/KYC and reporting obligations.

In the case of the issuance or trading of tokens or coins, depending on the legal nature of the token or coin or the structure of the issuance or trading, the issuing or trading company could be considered a VASP. If so, as a VASP, such company will have to make a VASP report to the KoFIU (see Section 1.c.ii. for details on the reporting requirement).

Classification of token/coins in the jurisdiction

According to news reports and other public sources, in July of 2021, the FSC began categorizing various virtual assets and preparing standards for classification by type in order to arrive at the appropriate regulatory measures by virtual asset type. While the expectation is that the FSC will classify virtual assets into exchange tokens, utility tokens or security tokens, as is the method chosen by the UK’s Financial Conduct Authority and Swiss Financial Market Supervisory Authority, the FSC has yet to officially announce the results of its review.

Presence of a duty to publish a prospectus bevor offering token/coins to investors

No laws or regulations impose any duties to publish a prospectus prior to an offering of tokens or coins. In other words, there is no duty to publish a prospectus solely because tokens or coins are being offered. However, if such tokens or coins are deemed to be financial investment instruments such as securities and the offering thereby becomes governed by the FISCMA, the Financial Consumer Protection Act, and other related laws and regulations, then there would be a duty to publish a prospectus under these laws. In reality, however, as the KoFIU will not accept VASP reports from companies offering tokens or coins, and such report must be accepted for the VASP to operate, the offering itself would be impermissible.

Presence of AML/KYC requirements that are needed to be fulfilled regarding (i) the initial issuance of token/coins and (ii) any following transfer of token/coins to third parties

As mentioned above, VASPs must comply with certain AML/KYC obligations under the Specified Financial Information Act.

  • CDD Duty: When a customer opens a new account (which is widely interpreted to include the act of entering into a contract for the purpose of initiating financial transactions, etc.) or engages in a one-time financial transaction over a certain amount, the VASP must verify the identity of the customer (i.e., client due diligence). 
  • EDD Duty: Separately, if there is a risk of money laundering (e.g., the customer is not the actual owner), the VASP must verify (i) matters concerning the identity of the customer and (ii) the purpose of the financial transaction, the source of funds, and more (i.e., enhanced due diligence).

Following the CDD and EDD, while the relevant transaction with the customer is ongoing, the VASP must set an appropriate re-evaluation cycle based on its risk assessment and periodically re-perform the CDD and EDD accordingly.

Additionally, VASPS are required to prepare AML procedures and work guidelines, report suspicious transactions, and fulfil a series of AML obligations under the Travel Rule and the Specified Financial Information Act; provided, the Travel Rule will be applicable starting on 25 March 2022.

Additional comments regarding (i) the legal situation for ICOs/token/coins and (ii) any following transfer of token/coins to third parties

As described above, various bills relating to virtual asset services are pending in the National Assembly, including bills that incorporate ICOs into the legal regime while imposing certain restrictions. Moreover, the leading presidential candidates have expressed their intention to consider allowing ICOs and have taken favourable stances on virtual assets.

Economic conditions

Market size for ICOs/token sales and existence of any previous regulated ICO/token sales in the jurisdiction

As mentioned in Section 1.j.i., because most Korean companies conduct their ICOs or token sales offshore, we did not find any statistical data on the market for ICOs or token sales in Korea.

Additional comments regarding the economic situation for ICOs/token sales or what companies must be aware of in this business area

If ICOs or token sales are permitted in the future, the market could expand rapidly, leading to increased competition between issuers of tokens or coins.



© 2022, Lee & Ko. All rights reserved by Lee & Ko as author and the owner of the copyright in this chapter. Lee & Ko has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this guide.

The information in this guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.


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