South Korea: Major Reform of Property Law to Include Crypto + Sanctions Against Dunamu
South Korea is experiencing a decisive turning point in its regulation of digital assets. Two major developments are occurring simultaneously: a historic reform of property law to classify cryptocurrencies as national assets, and targeted enforcement actions against Dunamu, the operator of Upbit, the country’s largest cryptocurrency exchange. This dual dynamic illustrates Seoul’s determination to legally structure the sector while enforcing existing rules.
A Historic Reform of Property Law
South Korea is preparing to amend a 76-year-old law — the Korean Civil Code, dating back to 1958 — to explicitly include cryptocurrencies as assets with patrimonial value. Currently, the South Korean legal framework does not formally recognize digital assets as “property” in a legal sense, creating a concerning legal vacuum in matters of inheritance, divorce, bankruptcy, and seizure.
This reform would allow for:
- Recognizing cryptocurrencies as seizable and transferable patrimonial assets
- Clarifying property rights in the event of death or divorce
- Allowing creditors to seize digital assets within legal proceedings
- Establishing a clear framework for tax declaration of cryptocurrency holdings
- Strengthening investor protection in the event of an exchange platform’s bankruptcy
This legislative initiative is part of a global trend where governments are seeking to adapt their civil law to the digital age. Japan, for example, already recognized Bitcoin as legal means of payment as early as 2017, while the European Union is advancing with the MiCA regulation (Markets in Crypto-Assets). South Korea, as one of the most active markets for cryptocurrencies in the world, could not remain on the sidelines of this legal evolution.
According to several local media outlets, the South Korean Ministry of Justice is working closely with the Financial Services Commission (FSC) to precisely define what constitutes a “digital asset” within the revised civil code. This definition is expected to include cryptocurrencies, non-fungible tokens (NFTs), and potentially other forms of digital assets.
Deep Implications for Investors
The reform of property law will have significant consequences for South Korean investors, who represent a substantial share of global cryptocurrency trading volume. It is estimated that about 15% of the South Korean population owns digital assets, making it one of the most crypto-exposed countries in the world.
Among the concrete implications of this reform:
- Inheritance: Heirs will now be able to legally claim the cryptocurrencies of a deceased person, which was not clearly possible before
- Divorce: Courts will be able to order the division of digital assets in divorce proceedings
- Bankruptcy: Judicial administrators will be able to seize and liquidate the cryptocurrencies of bankrupt individuals
- Credit: Banks could potentially accept cryptocurrencies as collateral
Sanctions Against Dunamu: A Strong Signal
In parallel with this legislative reform, South Korean authorities have intensified their control and sanction actions against Dunamu, the company that operates Upbit, the country’s largest cryptocurrency exchange platform. Upbit alone holds about 70% market share in South Korea, making it a systemic player in the sector.
The announced sanctions relate to several alleged shortcomings, including:
- Gaps in identity verification procedures (KYC)
- Non-compliance with certain reporting obligations to financial authorities
- Potential failures in protecting client funds
- Deficiencies in systems for detecting suspicious transactions
The FSC is reported to have imposed substantial fines on Dunamu, although the exact amounts have not yet been officially disclosed. This enforcement action falls within the broader framework of the Virtual Asset User Protection Act, which came into effect in July 2024 and imposes strict standards on exchange platforms.
The Paradox of South Korean Regulation
South Korea presents a fascinating paradox regarding cryptocurrency regulation. On one hand, the country is among the most technologically advanced in the world, and its population has massively adopted digital assets. On the other hand, the regulatory framework has long been unclear, leaving investors in a legal gray area.
This reform of property law, coupled with sanctions against Dunamu, sends a clear message: South Korea wants both to recognize and to regulate cryptocurrencies, rather than ignoring or banning them. This “both protective and permissive” approach could serve as a model for other Asian countries seeking to develop their own regulatory frameworks.
It is interesting to note that this evolution occurs as the global cryptocurrency market shows signs of maturity. At the time of writing, Bitcoin (BTC) was trading around 64,564 USDT, while Ethereum (ETH) was trading at approximately 1,868 USDT — levels that reflect a market in consolidation after the fluctuations of previous months.
What Impact on the Cryptocurrency Market?
The impact of these announcements on the South Korean cryptocurrency market could be significant. Historically, regulatory announcements in South Korea have triggered major price movements, due to the high trading volume in the country and local investors’ sensitivity to new regulations.
In the short term, sanctions against Upbit could lead to a loss of investor confidence in the platform, potentially benefiting competitors such as Bithumb or Coinone. In the longer term, the reform of property law is likely to attract more institutional investors, who may be reassured by the increased legal clarity.
Analysts suggest that this reform could also facilitate the entry of cryptocurrency investment funds (ETFs) into the South Korean market — a subject of intense debate in the country since the approval of Bitcoin spot ETFs in the United States in January 2024.
A Global Trend Toward Legal Recognition
South Korea’s decision to amend its civil code to include cryptocurrencies is part of a broader global trend. Many countries around the world are seeking to adapt their legal frameworks to the digital age:
- El Salvador made Bitcoin legal tender in 2021
- Switzerland recognized digital assets in its Code of Obligations
- Liechtenstein adopted a comprehensive law on digital assets (Token and Trusted Technology Service Provider Act)
- The United Arab Emirates have established a complete regulatory framework for virtual assets
With this reform, South Korea joins this movement while adding its own specificity: an approach that combines legislative reform with enforcement of violations, aiming to create an ecosystem that is both innovative and secure.
Conclusion
The dual announcement of the property law reform and the sanctions against Dunamu marks a pivotal moment for cryptocurrency regulation in South Korea. By legally recognizing digital assets as patrimonial property while sternly reminding exchange platforms of their obligations, Seoul is charting a balanced path between innovation and investor protection.
As the cryptocurrency market continues to mature globally, this South Korean approach could well serve as a reference for other countries facing the same regulatory challenges. Investors will closely follow the evolution of this situation, which could redefine the landscape of digital assets in Asia.
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