Asia Redefines Crypto: Japan and South Korea Classify Digital Assets Nationally as Vietnam Targets Offshore Traders

East Asian nations are rapidly overhauling their regulatory frameworks for digital assets, shifting from basic oversight to sophisticated integration. Japan and South Korea are leading the transition by reclassifying cryptocurrencies under mainstream financial and national asset laws, while Vietnam prepares to impose strict penalties on retail traders using offshore platforms.

In Japan, parliament has approved landmark amendments to the Financial Instruments and Exchange Act, officially reclassifying cryptocurrencies as financial assets. This legislative shift moves digital assets out of the jurisdiction of the Payment Services Act, placing them alongside traditional financial instruments. The transition introduces a dual-edged regulatory environment: while tax rates on crypto gains will be slashed from up to 55% to a flat rate of approximately 20% starting in 2028—complete with a three-year loss carry-forward provision—compliance requirements will tighten significantly.

Under the new framework, unlicensed digital asset platforms operating in Japan face severe penalties, including fines of up to 10 million yen or prison sentences of up to 10 years. Additionally, the Securities and Exchange Surveillance Commission will now actively police insider trading within the cryptocurrency sector to mirror protections found in traditional equity markets.

Meanwhile, South Korea is taking a historic step by proposing to embed digital assets directly into its sovereign wealth management rules. The Ministry of Economy and Finance announced plans to rewrite the country’s 1950 State Property Act, transforming it into the National Asset Basic Act. This reform marks the first time a national sovereign asset management statute will formally include cryptocurrency and intellectual property under the definition of national assets, shifting the state’s focus from merely holding real estate to actively generating value from its diverse holdings.

At the same time, the Bank of Korea is advancing its central bank digital currency initiatives. The central bank is expanding its Project Hangang CBDC pilot to include nine commercial banks for its second phase, which launches in September and will introduce biometric payments and peer-to-peer transfers.

However, domestic regulatory challenges persist. The Financial Supervisory Service has initiated sanction proceedings against Dunamu, the operator of the country’s largest exchange, Upbit, following a $30 million security breach. The regulator is assessing whether the incident breached the Virtual Asset User Protection Act, though current provisions do not explicitly penalize platforms for IT failures or external hacks—a gap lawmakers hope to close in the upcoming Digital Asset Basic Act. To protect retail participants, the Financial Services Commission is also extending victim compensation programs to cover cryptocurrency scams.

In contrast to Japan and South Korea’s integration efforts, Vietnam is focusing on strict enforcement against retail participation on foreign platforms. Ahead of the launch of its regulated digital asset market, the government plans to fine retail users up to $1,900 if they trade on unlicensed overseas platforms such as Binance, OKX, and Bybit. However, the Vietnamese Finance Ministry has yet to issue any operational licenses, though five local exchanges have received approval in principle. Vietnamese citizens trading assets designated exclusively for foreign investors face fines of up to $3,800, while unlicensed operators or companies failing to properly identify customers risk penalties of up to $7,600.

In Southeast Asia, geopolitical tensions have spilled over into the web3 space. The Network School, an educational initiative founded by entrepreneur Balaji Srinivasan in Forest City, Malaysia, has faced intense scrutiny from local activist groups.

The activist coalition Malaysia Protest 4 Palestine accused the school of hosting Israeli citizens using secondary passports. Malaysia maintains no diplomatic relations with Israel and strictly bans Israeli passport holders from entering the country, though dual nationals holding alternative passports currently remain a legal gray area. Following threats by Srinivasan to withdraw the school and its millions in investments from the country, the Malaysian Immigration Department conducted an investigation, confirming that all 266 foreign residents at the school hold valid documentation. Local state authorities in Johor are continuing to investigate the facility’s compliance with local business and commercial zoning laws.

Elsewhere in the region, corporate expansion and retail access continue to shift. Bybit is launching a regulated platform in Indonesia after acquiring local exchange NOBI, retaining the domestic firm’s leadership team to run operations. In Hong Kong, regulators have approved the territory’s first crypto-native tokenized fund, managed by Baillie Gifford, allowing professional investors direct on-chain ownership. Meanwhile, reports indicate that Coinbase has enabled account verification for users residing in mainland China using local identification cards and addresses, despite China not officially appearing on the exchange’s list of supported jurisdictions.