Beginning in June, specific non-profit organizations along with registered crypto exchanges will be permitted to sell their cryptocurrencies in South Korea. Non-profit organizations can cash out the crypto they amassed via donations, while exchanges can liquidate user fees collected in cryptocurrency.

The country’s top financial watchdog, the Financial Services Commission (FSC), announced on Tuesday that crypto exchanges and their banking partners must meticulously verify and scrutinize the source and purpose of transactions from new institutional clients.

The reinforcement of KYC procedures aims to safeguard the domestic crypto and fiscal market from potential money laundering threats, highlighted the FSC. In accordance with this objective, the watchdog stated that institutions, including their CEOs, should be closely observed for any money laundering-related activities.

The Korea Federation of Banks along with the Digital Asset Exchange Association (DAXA) is anticipated to circulate these directives to exchanges and banks later this month.

The FSC further disclosed that measures are underway to permit publicly listed companies and professional investor entities to trade on crypto exchanges by the second half of 2025. This will be accompanied by additional anti-money laundering mandates.

South Korea boasts one of the largest spot crypto markets globally. The country’s retail investors are especially keen on altcoins. By the close of last year, South Korea had approximately 9.7 million crypto exchange users, nearly 20% of the total population, per recent FSC data.

In the latter half of 2024, South Korea registered a daily average crypto trading volume of $5.26 billion, with the local crypto market cap swelling by 91% to reach $77.6 billion.

The forthcoming presidential election in June has put crypto in the spotlight, with both major candidates advocating for the reversal of the ban on spot crypto exchange-traded funds.

Disclaimer: This article is for informational purposes only and is not intended as legal, tax, investment, financial, or other advice. The Block operates independently to provide accurate, impactful, and timely information about the crypto industry.

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Introduction

The Lone Star State is taking the reins in cryptocurrency regulation, heralding a new era of financial accountability. In a remarkable move, Texas’ Senate recently passed House Bill 1666, designed to enforce stringent ‘proof-of-reserve’ requirements on cryptocurrency exchanges. The bill, which sailed through the Texas House of Representatives without significant amendments, is now awaiting the governor’s signature to become law​¹​. This legislation comes as part of Texas’ proactive approach to cryptocurrency regulation, establishing the state as a pioneer in this burgeoning industry.

The Proof-of-Reserves Bill Details

One of the key aspects of the bill is its restrictions on digital asset providers servicing more than 500 customers in Texas and holding at least $10 million of customer funds. These providers are prohibited from mixing customer funds with operational capital and using customer funds for transactions not demanded by the customer. Furthermore, the legislation obliges these exchanges to maintain sufficient reserves to fulfill potential withdrawals at any time, providing an extra layer of security for customers​²​.

The bill doesn’t stop at compliance. It includes measures for enforcing these provisions, granting the Texas Department of Banking the power to revoke licenses of providers who fail to meet these requirements. This move, combined with other recent legislative actions, shows Texas setting new precedents in the realm of digital currency, shaping the future of the industry​³​​⁴​.

Implications of the Texas Virtual Currency Act

The Texas Virtual Currency Act (TVCA), in which the ‘proof-of-reserves’ bill is a part, recognizes the legal status of virtual currency, subjects cryptocurrency to commercial laws under Texas regulations, and provides legal rights to cryptocurrency holders​⁵​​⁶​. Cryptocurrency firms offering ICOs must comply with the Texas Securities Act, and violations are subject to administrative, civil, and criminal sanctions​⁷​.

The Act also supplies legal rights to cryptocurrency investors, ensuring that virtual currency buyers acquire all rights in the virtual currency that the transferor had or had the power to transfer. This provision allows for multiple investors to have property rights in a single cryptocurrency​⁸​. Finally, the TVCA provides special rights to qualifying purchasers, defined as purchasers who obtain control of a virtual currency for value and without notice of any adverse claim​⁹​.

The post Texas Leads the Charge in Cryptocurrency Regulations: The Proof-of-Reserves Bill appeared first on Crypto Market Insights: Dive In with CryptoUpdate.io.