Hyeonsu “Elliot” Jin
MP elliot@decentlaw.ioElliot served as a corporate lawyer at Pyeongan Lawfirm and as in-house counsel for Chai Corporation, providing diverse corporate advisory services.
- Corporate · Startups
- Cross-border · Dispute Resolution
- Crypto
- VC · Financial Advisory
- IP Litigation
- Sports
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법률칼럼Traffic Accident Settlement Agreements: Why the Settlement Amount and Non-Punishment Statement Matter
1. Do You Always Need a Criminal Settlement with the Victim After a Traffic Accident? Not every traffic accident requires a separate criminal settlement with the victim. Article 3(2) of the Act on Special Cases Concerning the Settlement of Traffic Accidents provides that, in principle, a driver cannot be prosecuted against the victim's express wishes for causing injury through occupational negligence or gross negligence in a traffic accident. Article 4 of the same Act also provides that, in principle, prosecution is barred where the vehicle is covered by qualifying insurance or a mutual aid program that meets certain requirements. As a result, for an ordinary traffic accident, depending on the type of accident and whether comprehensive insurance applies, the criminal process may be resolved through insurance handling without a separate criminal settlement. However, there is an important exception. If the accident involved a serious violation specified in the proviso to Article 3(2) — such as running a red light or crossing the centerline — or falls under another statutory exception such as fleeing the scene without taking necessary measures, prosecution may proceed even if the victim does not wish to see the driver punished. So before asking "do I need to settle with the victim?", a suspect should first check what type of case the investigation is treating this as. 2. Do You Still Need a Separate Settlement Even If Insurance Already Paid Compensation? Because compensation through an insurer and settlement in a criminal case serve different purposes, having gone through insurance processing does not automatically mean a criminal settlement is unnecessary. Auto insurance is primarily meant to compensate civil damages arising from the accident — medical expenses, lost income, and pain and suffering. A criminal settlement, by contrast, is the process in which, while criminal proceedings are ongoing, the suspect pays a separate sum to help the victim recover from the harm and confirms whether the victim wishes to forgo punishment. How Insurance Claims and a Criminal Settlement Differ Category Auto Insurance Claim Criminal Settlement Main Purpose Civil compensation for damages Recovery from harm in the criminal case Who Pays Insurer / mutual aid association The suspect or defendant Main Content Medical costs, lost income, pain and suffering, etc. Settlement amount, non-punishment statement, etc. Relationship to Criminal Proceedings For certain accidents, having insurance itself relates to the special prosecution bar May affect whether charges are filed or the sentence, depending on the type of accident What to Check Insurance coverage and scope of compensation Scope of settlement, nature of the settlement amount, non-punishment statement In particular, Article 4 of the Act on Special Cases Concerning the Settlement of Traffic Accidents carves out an exception to the prosecution bar for insured vehicles where the accident falls under the proviso to Article 3(2), or where the victim suffers a life-threatening injury or an incurable or intractable disease. So the mere fact that the insurer is already paying medical costs does not mean the response to the criminal case is complete. The cause and extent of the accident, together with whether insurance applies, should be reviewed together to determine whether a separate criminal settlement is needed. 3. What Should You Check in a Traffic Accident Settlement Agreement? For a traffic accident settlement agreement, what matters is not the template itself but making clear what accident the payment relates to, how much is being paid, and exactly what scope the parties have agreed on. Some people simply search online for a settlement agreement template and use it as is, but because the reasons a criminal settlement is needed and the insurance situation differ from case to case, using identical wording across cases may not be appropriate. First, the agreement should clearly identify which accident it concerns. It should record the date, time, and location of the accident and the parties involved, and if the case has already been reported to the police, information that can identify the case should be organized as well. Next, the settlement amount and the method of payment should be clearly specified. If the amount has already been paid, records such as bank transfer history that confirm payment should be kept; if payment is scheduled for later, a specific payment deadline should be set. Another important element is the character of the settlement amount. The Supreme Court has taken the position that, absent special circumstances, where a victim in a criminal case receives a settlement amount from the offender and agrees not to seek punishment, that amount is treated as part of the compensation for the victim's property damage. So if compensation through the insurer is proceeding separately, it is worth reviewing what purpose the criminal settlement amount serves and how the agreement addresses its relationship to civil compensation. Finally, what matters most for a suspect is whether the victim's non-punishment intent is actually confirmed. Simply stating that the parties "reached an amicable settlement" or that the victim "received the settlement amount" does not always make clear that the victim does not wish to see the suspect punished. 4. Why Do the Settlement Amount and the Non-Punishment Statement Matter? In a criminal settlement, the fact that a settlement amount was paid and the victim's intent not to seek punishment are separate issues, so it is important to address both together. The Settlement Amount Can Show Real Recovery from the Harm There is no fixed statutory amount for a criminal settlement based on the type of accident. The amount is negotiated between the parties based on individual circumstances, including the severity of the victim's injury, the length of treatment, how the accident occurred, and how much of the harm has already been recovered through insurance. The Supreme Court Sentencing Commission's current sentencing guidelines for traffic offenses also treat "non-punishment intent or substantial recovery from the harm" as a major mitigating factor. These guidelines were revised on March 30, 2026 and have been in effect since July 1, 2026. So if there is a possibility of criminal punishment for a traffic accident, it is worth preparing not only proof that a settlement amount was paid but also evidence of how much of the harm has actually been recovered. A Settlement Agreement and a Non-Punishment Statement Are Not the Same Document A settlement agreement is the document in which the suspect and the victim confirm the settlement amount and the terms of settlement. A non-punishment statement, on the other hand, is a separate document in which the victim clearly expresses that they do not wish to see the suspect punished — its purpose is different. Article 3(2) of the Act on Special Cases Concerning the Settlement of Traffic Accidents is based on the victim's "express intent." So the mere fact that the suspect transferred a settlement amount to the victim does not automatically establish that the victim does not wish to see the suspect punished. If the settlement agreement itself clearly states that the victim does not wish to see the suspect punished, it cannot be said that a separate non-punishment statement is always required for that intent to be validly expressed. Still, because it is important in criminal proceedings to clearly confirm the victim's intent, in practice it matters to record the terms of the settlement and the non-punishment intent through a reliable separate document, such as a non-punishment statement. Timing Matters for the Non-Punishment Statement In an offense where prosecution is barred if the victim objects, there is also a time limit on withdrawing the victim's wish for punishment. Under Article 232(1) and (3) of the Criminal Procedure Act, in a case where prosecution cannot proceed against the victim's express wishes, withdrawing the wish for punishment is possible only before the first-instance judgment is rendered. So in a case that has already gone from a police investigation to trial, rather than simply thinking "we can settle at some point," the current stage of the proceedings and the timing of any settlement should be considered together. 5. How Does the Effect of a Settlement Differ for the 12 Major Traffic Offenses or Cases Involving Serious Injury? Whether a case involves one of the 12 major traffic offenses or an ordinary traffic accident with serious injury can change the legal significance of a victim's settlement and non-punishment intent. First, if the accident falls under the proviso to Article 3(2) of the Act on Special Cases Concerning the Settlement of Traffic Accidents — such as running a red light, crossing the centerline, or violating a pedestrian's right of way at a crosswalk — the victim's wish not to see the driver punished does not have the effect of barring prosecution. In other words, settling with the victim in a case involving one of the 12 major traffic offenses does not automatically end the investigation or trial. That said, this does not mean a criminal settlement is meaningless. Because the current sentencing guidelines for traffic offenses treat non-punishment intent or substantial recovery from the harm as a positive sentencing factor, recovery from the harm and whether a settlement was reached can still be considered in determining the sentence. On the other hand, for an accident involving serious injury under Article 4(1)(2) of the Act, being covered by comprehensive insurance alone does not restrict prosecution. However, if the accident does not fall under the proviso to Article 3(2), the victim's express non-punishment intent regarding occupational-negligence injury and similar charges may still be a separate issue, so it should not be assumed that a serious-injury case will always continue regardless of settlement. Also, cases involving a fatality, fleeing the scene, drunk driving, or other charges under separate statutes may be governed by different rules. So a suspect should check their case in this order: type of accident → applicable charges → whether insurance applies → extent of harm → the effect of settlement and non-punishment intent. 6. Frequently Asked Questions (FAQ) Q1. Do I Still Need a Criminal Settlement If Comprehensive Insurance Is Already Covering All the Medical Costs? It depends on the type of accident. For an ordinary traffic accident, the special protection under comprehensive insurance may apply, but if the case falls under an exception such as one of the 12 major traffic offenses or a statutorily defined serious injury, having insurance alone may not resolve the criminal proceedings. So you should first check what charge the police are investigating, not just whether insurance is being processed. Q2. Do I Have to Pay Whatever Settlement Amount the Victim Demands? You are not legally required to pay exactly the amount the victim proposes. There is no fixed statutory amount for a criminal settlement in a traffic accident; the amount is negotiated between the parties based on the extent of the harm, the length of treatment, how the accident occurred, and how much has already been recovered through insurance. That said, in a case with a real possibility of criminal punishment, it is worth considering not just how large or small the amount is, but what recovering the harm through settlement actually means for the case. Q3. What Should I Do If the Victim Refuses to Settle? A victim cannot be forced to settle. If the victim does not respond to settlement, it is worth objectively organizing how much of the harm has been recovered through insurance and what efforts the suspect made toward a settlement. Because the outcome of a criminal case is not determined by settlement alone, other sentencing factors — how the accident occurred, the degree of negligence, the extent of harm, and any criminal record — should be prepared as well. 7. Summary and Key Takeaways Not every suspect in a traffic accident case needs a separate criminal settlement with the victim. But if a criminal settlement is needed, it matters more to check that the character and scope of the settlement amount and the victim's non-punishment intent are clearly confirmed than simply to use a generic settlement agreement template. In particular, in cases involving the 12 major traffic offenses, proceedings may continue even with a non-punishment statement, while in other types of traffic accidents the victim's express non-punishment intent can carry significant weight in whether charges are filed — so it is important to first identify which category the accident falls into. Decent Law Firm reviews the dashcam footage, the circumstances of the accident, the victim's medical records, and the status of insurance processing to assess the applicable charges and the need for a criminal settlement from a professional perspective. You can also work with attorneys experienced in numerous traffic accident settlements to review the settlement process, the settlement agreement and non-punishment statement, and the response needed at the police investigation and trial stages. If you are facing a police investigation, or are already discussing settlement with the victim, it is best to first check what legal significance a settlement actually has in your case, rather than deciding on the settlement amount first.
2026-08-28 -
법률칼럼
Crypto Transfers to Self-Hosted Wallets: What Changes Under Korea’s Travel Rule in 2027?
Transfers from a Korean crypto exchange to a self-hosted wallet (personal wallet) such as MetaMask are not currently treated in the same way as Travel Rule transfers between virtual asset service providers (VASPs). However, following the August 2026 amendment to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information, Korea will strengthen its AML requirements for virtual asset transfers. From February 19, 2027, the KRW 1 million threshold for the Travel Rule will be removed, and transactions involving overseas VASPs and self-hosted wallets will also become subject to separate risk-based AML requirements. For self-hosted wallet transactions, factors such as who actually owns or controls the wallet, whether the sender and recipient are the same person, the purpose of the transaction, and the flow of funds will become increasingly important. Does the Travel Rule Apply to Transfers to Self-Hosted Wallets? A transfer to a self-hosted wallet is not currently treated in the same way as a Travel Rule transfer between VASPs. Under Korea’s current Travel Rule framework, when a VASP transfers virtual assets worth KRW 1 million or more to another VASP, specified information regarding the sender and recipient must be provided. A self-hosted wallet such as MetaMask, however, is controlled directly by the user and is not itself a Korean VASP. Accordingly, withdrawals to self-hosted wallets should be reviewed not only from a Travel Rule perspective but also in light of the exchange’s AML obligations and wallet verification policies. Depending on the exchange, users may already be required to register a wallet address or verify ownership before making a withdrawal. Official Legislation Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information What Will Change for Self-Hosted Wallet Transactions in 2027? From February 19, 2027, virtual asset transfers involving self-hosted wallets will become subject to enhanced risk-based AML controls. The amended Enforcement Decree expands the obligations imposed on VASPs in connection with virtual asset transfers. The Financial Services Commission (FSC) has outlined the following regulatory approach. 🔹 Self-Hosted Wallet and Overseas VASP Transactions from 2027 Transaction Type Expected Regulatory Approach Low-risk overseas VASP Virtual asset transfers generally permitted Other overseas VASPs Generally permitted where the sender and recipient are the same person Self-hosted wallet Generally permitted where the sender and recipient are the same person High-risk transaction Transfer may be restricted or prohibited Transactions of KRW 10 million or more involving overseas VASPs or self-hosted wallets A separate suspicious transaction monitoring framework must be established and operated Accordingly, a withdrawal to a wallet controlled by the customer may be treated differently from a direct withdrawal to a wallet controlled by a third party. However, the detailed risk-assessment standards and implementation methods will need to be reviewed together with the relevant KoFIU regulations and the policies of individual exchanges. Official Source Financial Services Commission – August 11, 2026 What About Deposits from a Self-Hosted Wallet to a Korean Exchange? Deposits from a self-hosted wallet to a Korean exchange may also be subject to review. The amended framework covers transactions in which a VASP transfers virtual assets to, or receives virtual assets from, a self-hosted wallet. Accordingly, when virtual assets are deposited from a self-hosted wallet into a Korean exchange, factors such as the actual wallet owner, the source of funds, and the purpose of the transaction may become important. Where assets are repeatedly deposited from multiple wallets, it is advisable to retain transaction records showing the source and movement of the assets. Can the Travel Rule Be Avoided by Splitting Transfers Below KRW 1 Million? No. Splitting transfers into amounts below KRW 1 million does not place the transactions outside AML scrutiny. The current Travel Rule threshold for VASP-to-VASP transfers is KRW 1 million. From February 19, 2027, this threshold will be removed and the Travel Rule will apply regardless of the transfer amount. Even under the current framework, transactions below KRW 1 million are not automatically excluded from AML monitoring. The FSC has cited a case involving approximately KRW 200 million in virtual assets that was withdrawn through 216 separate transactions below KRW 1 million as an example of activity potentially intended to circumvent regulatory controls. Accordingly, factors such as repeated split transfers, wallet ownership, the source and movement of funds, and the purpose of the transaction may also be reviewed. Frequently Asked Questions (FAQ) Q1. Does the Travel Rule apply when I withdraw crypto to MetaMask? Not in the same manner as a transfer between two registered Korean VASPs under the current framework. However, exchange-specific wallet verification and AML requirements may still apply. From February 19, 2027, self-hosted wallet transactions will also become subject to enhanced risk-based AML controls. Q2. Can I withdraw less than KRW 1 million to a self-hosted wallet without restrictions? A transaction below KRW 1 million is not automatically excluded from AML monitoring. Repeated small withdrawals or transactions involving multiple wallets may still be reviewed based on the overall transaction pattern. In addition, the KRW 1 million Travel Rule threshold between VASPs will be removed from February 19, 2027. Q3. Will transfers to another person’s self-hosted wallet be prohibited? Not necessarily. A blanket prohibition on all transfers to third-party wallets has not been established. However, the Financial Services Commission has indicated that transactions involving self-hosted wallets will generally be permitted where the sender and recipient are the same person. The detailed scope of permitted transactions and exceptions will depend on implementing regulations and individual exchange policies. Q4. Will deposits from a self-hosted wallet to a Korean exchange also be subject to enhanced controls? Yes. The new framework applies not only to withdrawals but also to situations where a VASP receives virtual assets from a self-hosted wallet. The exchange may therefore review wallet ownership, transaction history, source of funds, and the purpose of the transfer. Q5. Does a transaction of KRW 10 million or more automatically trigger a Suspicious Transaction Report (STR)? No. A transaction does not automatically become reportable solely because it exceeds KRW 10 million. The announced framework requires VASPs to establish and operate a separate monitoring system for transactions of KRW 10 million or more involving overseas exchanges or self-hosted wallets. Whether an STR is ultimately required depends on the specific circumstances, including the source of funds, transaction purpose, transaction pattern, and counterparty. Prepare for the New Self-Hosted Wallet Rules Before February 2027 From February 19, 2027, Korea’s Travel Rule will apply to all transfers between VASPs regardless of amount, while risk-based AML controls for transactions involving self-hosted wallets and overseas VASPs will also be strengthened. For self-hosted wallet transactions, actual wallet ownership and control, whether the sender and recipient are the same person, the purpose of the transaction, and the flow of funds may become increasingly important. Businesses that use self-hosted wallets or overseas exchanges for recurring payments, transfers, or settlement should review their transaction structures and applicable regulatory requirements before the new rules take effect. Decent Law Firm advises clients on Korean virtual asset regulations, self-hosted wallet and overseas VASP transactions, Travel Rule compliance, and AML obligations under the Act on Reporting and Using Specified Financial Transaction Information.
2026-08-28 -
법률칼럼
Crypto Market Making in Korea: Legal Risks for Token Projects and Market Makers
Crypto market making is not automatically considered market manipulation under Korean law. However, the legal analysis does not stop at whether an agreement is labeled as a “market making” or “liquidity provision” arrangement. The key issue is how the trading strategy is actually structured and executed—particularly whether it is designed to artificially create trading volume, influence prices, or induce other investors to trade. For foreign token projects, foundations, and market makers engaging with Korean exchanges or Korean users, this means that the Market Making Agreement, trading instructions, API logic, token lending structure, and fee arrangements should be reviewed together. What Is Crypto Market Making? Crypto market making generally refers to the continuous placement of buy and sell orders in order to provide liquidity to a trading market. For newly listed or relatively illiquid virtual assets, limited order-book depth may result in wide bid-ask spreads and significant price movements even from relatively small orders. To address this, a token project may provide tokens or capital to a professional market maker, which then places buy and sell orders on one or more exchanges. A typical market making arrangement may include provisions concerning: Target exchanges and trading pairs Bid-ask spreads Liquidity or volume requirements Token lending and return arrangements Trading capital Service fees and performance-based compensation API or algorithmic trading systems The important point is that entering into a Market Making Agreement does not determine the legal characterization of the actual trading activity. What matters is how those contractual terms are implemented in the market. Is Crypto Market Making Legal in Korea? Crypto market making is not unlawful merely because liquidity is being provided to the market. However, actual trading activity may fall within Korea’s prohibition on unfair trading if it is intended to induce other investors to trade or to artificially influence trading volume or prices. Article 10 of Korea’s Act on the Protection of Virtual Asset Users prohibits, among other conduct: Matched orders Wash trades Transactions designed to create a false appearance of active trading Transactions intended to artificially move or stabilize the price of a virtual asset Other fraudulent or deceptive trading practices Accordingly, describing a trading arrangement as “liquidity provision” is not sufficient. The actual analysis may require reviewing: Who determines the trading strategy Whether specific price or volume targets are imposed Whether the token project participates in or directs trading decisions Whether the market maker’s compensation is linked to price or volume performance How orders, cancellations, and executions actually occur The distinction between legitimate liquidity provision and unlawful market manipulation therefore depends heavily on the purpose and structure of the actual trading activity. Act on the Protection of Virtual Asset Users – Article 10 What Market Making Structures May Create Higher Regulatory Risk? Market manipulation risk may increase where a market making arrangement goes beyond providing ordinary liquidity and instead seeks to artificially create a particular level of trading activity or price. 🔹Key Market Making Terms to Review Structure Key Legal Issue Minimum trading volume Whether volume is being artificially generated regardless of genuine market demand Target price Whether trading is intended to push the token toward a specified price Price floor or price band Whether the strategy constitutes ordinary liquidity provision or artificial price stabilization Repeated high-priced purchases Whether orders are intended to induce additional buying by other investors Multiple trading accounts Whether economically identical parties are trading against each other API trading How orders, cancellations, and re-orders are triggered Token lending How the market maker may use or dispose of the tokens and how they must be returned Performance fees Whether compensation is directly tied to price appreciation or increased trading volume A contractual requirement to maintain liquidity or a certain spread does not, by itself, establish unlawful conduct. The analysis may change, however, where the actual strategy involves repeated trades unrelated to genuine market demand, artificial volume generation, or continuous buying designed to defend a specific token price. The contractual KPI and the actual trading strategy should therefore be reviewed together. Can API or Algorithmic Market Making Create Market Manipulation Risk? The use of APIs or automated trading systems does not itself constitute market manipulation. Automated order placement is commonly used in market making because market makers must respond quickly to changing order-book conditions. The legal issue is what type of trading strategy has been automated. Additional review may be required where an automated strategy involves, for example: Repeated high-priced purchases Large orders followed by rapid cancellations Multiple accounts placing coordinated orders Repeated trades designed primarily to generate volume Orders designed to influence prices across multiple exchanges In July 2026, the Korean Financial Services Commission disclosed enforcement cases involving virtual asset market manipulation using high-frequency API trading, high-priced purchases, and manipulative order strategies. The significance of these cases is not that API trading itself is prohibited, but that the purpose, order pattern, and resulting market impact of the trading activity are subject to scrutiny. FSC – Key Results of Virtual Asset Unfair Trading Investigations What Should Be Reviewed in a Market Making Agreement? A Market Making Agreement should be reviewed not only for commercial terms, but also for how those terms may influence actual trading behavior. Trading Volume Requirements Where daily or weekly trading volume targets are imposed, the key issue is not simply the existence of a target. The review should determine how the market maker is expected to achieve the required volume and whether the strategy may result in transactions unrelated to genuine market demand. Price-Related Conditions Terms such as “maintain the price above a certain level,” “defend against price declines,” or “reach a target price” require particular attention. Ordinary spread management and trading intended to artificially maintain or influence a specific market price should not be treated as the same activity. Token Lending and Return Where a project provides a significant number of tokens to the market maker, the agreement should clearly address: Permitted use of the tokens Disposal authority Return obligations Settlement mechanics Allocation of trading profits and losses Performance Fees and Trading Authority Performance-based compensation should also be examined, particularly where fees are linked directly to token price appreciation or trading volume. In addition, even where the written agreement gives the market maker independent trading authority, actual instructions sent through Telegram, Slack, email, or other channels may become relevant if the project is directing specific price or volume outcomes. Is Reviewing the Market Making Agreement Alone Sufficient? No. The agreement and the actual operating structure should be reviewed together. A contract may simply refer to “liquidity enhancement,” “spread maintenance,” or “market making services.” Actual communications or trading instructions, however, may contain materially different expectations concerning price support or volume generation. For this reason, a legal review may need to cover not only the agreement itself but also: Market Making Agreement and side letters Internal operating guidelines and KPIs Exchange order and execution records API logic and trading parameters Trading-account structure Token and fund transfers Telegram, Slack, email, and other trading instructions Fee and performance compensation arrangements The key issue is not only what the contract says, but how the contractual terms are implemented through actual orders and executions. Do Korean Rules Apply to an Offshore Market Maker? Using an offshore market maker does not automatically exclude the application of Korean law. Article 3 of the Act on the Protection of Virtual Asset Users provides for extraterritorial application where conduct outside Korea produces effects within Korea. Accordingly, Korean regulatory exposure should be considered where, for example: Market making is performed on a Korean exchange A token is listed on both Korean and overseas exchanges Trading on an offshore exchange is used to influence the Korean market A Korean project directs an offshore market maker regarding price or volume Korean regulators have also investigated cases involving virtual assets listed simultaneously on Korean and foreign exchanges where trading activity across markets was allegedly used to influence Korean investors. Depending on the exact scope of services, it may also be necessary to consider whether the market maker’s activities raise separate issues under Korea’s virtual asset service provider regulatory framework. Act on the Protection of Virtual Asset Users What Should Be Reviewed Before Entering into a Market Making Arrangement? Before entering into a Market Making Agreement, the project and market maker should align the contractual terms with the anticipated trading structure. 1. Roles and Trading Authority Determine who establishes the trading strategy and who has authority to execute orders. 2. Price and Volume KPIs Review whether spread, liquidity, volume, or price-related KPIs may require problematic trading behavior in practice. 3. Token and Fund Flows Map how tokens and trading capital move from the project to the market maker and ultimately to exchange accounts. 4. Trading Method Determine whether trading will be manual, API-based, or algorithmic, and whether multiple accounts or exchanges will be used. 5. Compensation Structure Assess whether compensation is simply payment for liquidity services or is directly tied to price appreciation or increased trading volume. The relevant contracts, order logs, API records, internal instructions, and token transfer records should also be retained appropriately. These materials may become important if the trading activity is later reviewed by an exchange, regulator, or investigative authority. What Are the Consequences of Market Manipulation in Korea? Market manipulation involving virtual assets may lead to administrative sanctions, criminal liability, and civil damages. The Act on the Protection of Virtual Asset Users provides for monetary penalties in relation to unfair trading conduct and criminal penalties for violations of Article 10. The severity of sanctions may vary depending on factors including the amount of unlawful profit or avoided loss. The Financial Services Commission announced in July 2026 that, during the first two years following implementation of the Act, Korean authorities had completed approximately 40 unfair-trading investigations and referred or reported more than 30 cases to investigative authorities. Accordingly, market making structures should not be reviewed only after an enforcement issue arises. Potential unfair-trading exposure should be assessed at the contract and trading-structure stage. FSC – Key Results and Future Plans for Virtual Asset Unfair Trading Investigations Frequently Asked Questions (FAQ) Q1. Is using a crypto market maker illegal in Korea? No. The use of a market maker does not itself establish market manipulation. The actual trading strategy, purpose, project involvement, and price or volume conditions must be reviewed. Q2. Can a Market Making Agreement require a minimum trading volume? A minimum volume requirement is not automatically unlawful. However, if the target is achieved through transactions intended to create an artificial appearance of active trading, the arrangement may raise unfair-trading concerns. Q3. Can a project ask a market maker to maintain a minimum token price? Price-support or price-floor arrangements require particular caution. Korean law prohibits certain transactions conducted for the purpose of inducing other investors to trade by artificially moving or stabilizing the market price. Q4. Is API-based market making considered market manipulation? No. The use of an API itself is not prohibited. The relevant issue is whether the automated strategy is designed to artificially generate volume, influence prices, or induce other investors to trade. Q5. Does Korean law apply to foreign market makers? It may. Where offshore trading produces effects in Korea, including through Korean exchange markets or Korean investors, the potential application of Korean virtual asset regulations should be reviewed. Market Making in Korea Requires More Than Contract Review The central legal issue in crypto market making is not whether a contract describes the activity as “liquidity provision.” The key questions are how orders are actually generated, what objectives the project gives to the market maker, and what price and trading volume are ultimately created by the strategy. Where price targets, volume KPIs, API trading, token lending, and performance compensation are combined, the legal analysis should cover both the written agreement and the actual operating structure.
2026-08-27
