South Korea’s Bold Move: Digital Won Tests and Crypto Regulations Set to Transform Finance!

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South Korea Tests Digital Won at Scale as Central Bank Eyes AI-Driven Payments for 2026

Key Takeaways

  • South Korea’s central bank expanded its digital won pilot to nine banks, adding P2P transfers and AI-agent payment capabilities in Phase 2.
  • The corporate crypto investment ban is being lifted, and capital gains tax has been deferred to 2027.
  • A proposed 20% ownership cap on exchange shareholders faces heavy pushback, forcing massive divestments across the industry.
  • The Digital Asset Basic Act remains delayed over stablecoin issuance disputes.

From October 2023 to August 2025, the first phase of the project saw 114,880 transactions made by 81,000 people – which averages to less than two transactions per person over almost two years. The system didn’t gain wider use because users found it too difficult compared to simply using their existing credit or debit cards.

Phase 2 is designed to address the shortcomings of the previous phase. According to CoinDesk, it will add features like automatic account refills, security through fingerprint or facial recognition, direct transfers between users, and the distribution of government benefits – including payments for electric vehicle charging – using digital won. Real-world testing with actual transactions is planned for late 2026. Importantly, the Bank of Korea is also investigating the use of artificial intelligence to make and pay for purchases automatically with digital currency, which could eventually enable machines to conduct economic transactions using the country’s sovereign money.

As a researcher on this project, we’re still facing some technical hurdles. Our initial simulations highlighted potential problems with how quickly the blockchain can handle transactions and maintaining user privacy. We’re currently digging deeper into whether it can process data fast enough when demand is at its highest. On the legal side, things are also a bit uncertain. The proposed Digital Asset Basic Act, which would provide rules for stablecoins, is stalled because different organizations can’t agree on who should be in charge of issuing them.

Digital Asset Regulation

South Korea’s crypto regulation runs on two tracks, with only the first fully active.

Since July 2024, the Virtual Asset User Protection Act has been in place to better protect users of cryptocurrency exchanges. It requires exchanges to keep the majority of user funds (80%) offline in secure “cold wallets,” have enough funds reserved to cover potential losses, and strictly prohibits illegal practices like insider trading and market manipulation, which are now punishable as crimes.

The next step, called the Digital Asset Basic Act, is expected to be finalized by 2026. This new law will regulate stablecoins by requiring banks to own at least 51% of any company issuing them. It also establishes a system where operators can be held liable for issues, even if they weren’t negligent, and clearly defines rules for initial coin offerings (ICOs) and the listing of tokens.

More and more traditional institutions are getting involved in crypto. South Korea’s FSC plans to end a nearly ten-year restriction on company investments in cryptocurrencies by early 2026, potentially letting publicly traded companies invest up to 5% of their capital in the twenty largest cryptocurrencies. The tax on crypto profits has been delayed again, now until January 2027, and the first KRW 50 million of gains will be tax-free. At the same time, authorities are increasing efforts to prevent money laundering, giving the Financial Intelligence Unit greater power to freeze accounts connected to criminal activity starting in 2026.

South Korea’s New Proposal to Cap Exchange Holders

The government’s plan to limit major exchange shareholders to 20% ownership essentially forces a change in an industry traditionally run by its founders.

The government and its ruling party have tentatively agreed to add a limit to the Digital Asset Basic Act, classifying cryptocurrency exchanges as essential parts of the financial system. The Financial Services Commission might permit ownership stakes of up to 34% under certain conditions. Larger, established exchanges will have three years to meet the new requirements, while smaller exchanges could be given up to six.

As an analyst, I’ve been looking into the recent market volatility, and the ownership structures of these exchanges explain a lot of the current concern. We’re seeing extremely concentrated ownership: Korbit is now 92.1% controlled after the Mirae Asset acquisition, Bithumb Holdings owns 73.6% of Bithumb, and Binance has a 67.5% stake in Gopax. Even Coinone shows significant concentration at 53.4%. Interestingly, even Upbit, the largest exchange, would likely need to reduce its controlling stake by 5 to 10 percentage points to meet typical compliance standards.

The Digital Asset Exchange Alliance believes the proposed restrictions are a first-of-their-kind overreach, infringing on ownership rights and potentially hindering the growth of the digital asset industry. Experts are concerned that forcing founders to sell parts of their companies could create instability. The planned merger between Dunamu and Naver Financial is now even more complex due to these required changes. Investors are carefully monitoring the situation, as prolonged selling over the next few years could significantly lower the value of these exchanges, a scenario with no clear parallel in the Korean market.

South Korea is moving quickly to create its own digital currency, establish clear rules for the crypto market, and prevent any single entity from dominating cryptocurrency exchanges – a combination of efforts that’s rare globally. By the latter half of 2026, it will become clear whether they can successfully implement these ambitious plans.

This article is for informational purposes only and shouldn’t be considered financial, investment, or trading advice. Coindoo.com doesn’t support or suggest any particular investment or cryptocurrency. Always do your own research and talk to a qualified financial advisor before investing.

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2026-03-19 22:41