South Korea's Financial Services Commission (FSC) Announces New Crypto Regulations for Nonprofits and Virtual Asset Exchanges

South Korea's fourth virtual asset committee has announced that nonprofit organizations and virtual asset exchanges will be permitted to sell their virtual assets from June 1, provided they have sufficiently completed internal review procedures and upgraded anti-money laundering (AML) measures. Nonprofits will be able to accept cryptocurrency donations and convert them to fiat immediately, with transactions limited to mainstream cryptocurrencies on Korean won exchanges.

The Financial Services Commission (FSC) is granting nonprofit organizations the right to engage in crypto transactions, a significant regulatory shift. Nonprofits must be in accordance with Korea's AML standards, which are used for banks and other financial institutions. Cryptocurrency donations must be immediately converted to fiat and transactions limited to major tokens such as Bitcoin or Ethereum, renderingoperability on Korean won exchanges. This focus on widely accepted assets is designed to reduce volatility, fraud risk, and storage complications for nonprofits.

Nonprofit organizations and exchanges must also carry out internal governance checks and adjustments to AML regulations before they can be granted permits for crypto transactions, according to a statement released on Monday.

The move follows a period of heightened scrutiny on smaller exchanges and meme token issuers, highlighting the government's commitment to mitigating financial crime and speculation, and legitimizing crypto listing rules.

Announced in March, the new crypto listing rules stipulate a mandatory minimum circulation volume for any new cryptocurrency entering the market. This measure aims to eliminate thinly traded tokens, often dubbed "zombie tokens", that can be easily manipulated due to their low liquidity.

"In order to prevent the listing of poorly liquid tokens that could be used for pump-and-dump schemes, a minimum amount of circulation volume will be required," the commission said.

By enforcing this rule, the Financial Services Commission (FSC) intends to bolster market integrity and enhance investor protection. Moreover, during the initial listing phase, exchanges will be prohibited from accepting market price orders. This step aims to dampen the extreme price swings typically seen during the early hours of trading, often driven by hype or coordinated pump-and-dump tactics.

The Financial Services Commission (FSC) is also focusing on limiting the listing of tokens that have gained popularity through social media trends or community hype, commonly known as meme tokens. These tokens are often associated with rapid and artificial price surges, driven by online discussions and promotions.

"We will put in place measures to prevent the listing of tokens that have no use cases other than being a subject of discussion in online communities after their initial listing," a statement from the commission reads.

This move signals a shift in priorities for the Korean regulators, who are keen on fostering a sustainable and stable cryptocurrency ecosystem within the country's borders.