South Korea has expanded plans for its financial regulatory sandbox to include digital asset related laws, opening the door for a wider range of blockchain and fintech services to seek regulatory exemptions.
Summary
- South Korea plans to expand its financial regulatory sandbox to cover digital asset laws, including the Virtual Asset User Protection Act.
- The Financial Services Commission said the changes would allow more innovative financial and blockchain based services to seek regulatory exemptions.
- The proposal comes as South Korea prepares a new licensing framework for cross border virtual asset transfers and reviews stablecoin and digital asset initiatives.
According to local media, South Korea’s Financial Services Commission announced the proposal on June 19 during a fintech policy event chaired by FSC Chairman Kim Byoung-hwan.
The agency said it plans to broaden the list of laws eligible for regulatory sandbox treatment, including the Virtual Asset User Protection Act, as part of a wider overhaul of the financial innovation framework.
The FSC said the current scope of regulatory exemptions limits the types of services that can enter the sandbox. Officials said expanding eligible legislation would give regulators greater flexibility to approve and operate new financial services as technology and market conditions evolve. The commission added that it plans to identify additional laws tied to new financial sectors and infrastructure changes, including the Internet-Only Bank Act and digital asset regulations.
The proposal forms part of a broader package aimed at increasing participation in the sandbox program, protecting innovative business ideas, and helping fintech companies transition into the regulated financial sector.
Digital asset rules enter sandbox agenda
The commission said it will seek amendments to the Enforcement Decree of the Financial Innovation Support Act during the third quarter to support the expanded framework.
Officials also said they would work with government ministries and industry groups to identify areas where financial firms require regulatory flexibility. The FSC stated that the objective is to encourage the development of a wider range of innovative financial services.
The agency plans to revise its review process for sandbox applications as well. Under the proposal, applications that face little regulatory disagreement could receive faster approval, while a new expert committee would conduct additional reviews before cases reach decision-making bodies.
Authorities also outlined plans to expand so-called “planned sandboxes,” where regulators design pilot projects and test services before pursuing permanent regulatory changes. Proposed areas include AI-based financial systems, financial inclusion initiatives built on fintech technology, and the removal of network separation requirements for qualified financial institutions.
The FSC said it also intends to strengthen support for startups by allowing exclusive operating rights to begin from the point of designation rather than after a company receives full authorization. Authorities will also provide package-based support for service commercialization costs.
The regulator said it will continue consulting with industry participants and related institutions as it moves forward with the proposed reforms and works to implement the changes across the financial sector.
Changes come as digital asset policy evolves
The sandbox expansion arrives as South Korea develops new rules for blockchain-based financial services.
Earlier this month, the government enacted amendments to the Foreign Exchange Transactions Act that will create a licensing regime for cross-border virtual asset transfers beginning in December. Under that framework, businesses that provide international virtual asset transfer services must register with the Ministry of Economy and Finance and report transactions through the Bank of Korea’s foreign exchange monitoring system.
Government officials have also been reviewing whether participation in the new regime should extend beyond existing virtual asset service providers to fintech companies that can support cross-border transfer services.
Interest in blockchain-based payment infrastructure has increased in the country. On June 22, Toss Bank disclosed a memorandum of understanding with the Solana Foundation to test stablecoin-based remittances and settlement services.
The bank said the project will evaluate blockchain infrastructure for overseas transfers, payments, and future digital asset-related financial services.
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