South Korea’s financial watchdog has tightened its restrictions on cryptocurrency by rejecting the launch of exchange-traded funds (ETFs) tracking companies associated with digital assets. This decision follows a 2017 government directive and a broader ban on Bitcoin spot and futures ETFs under the South Korean Capital Markets Act. Local asset managers have been put on hold as the Financial Supervisory Service (FSS) has blocked efforts to launch ETFs focusing on companies like Coinbase.
The rejection of ETFs investing in virtual asset firms has caused hesitation among domestic asset managers. Without clear guidelines from the FSS, firms are cautious about moving forward with blockchain-focused ETFs. However, some in the local market argue that the FSS’s approach is overly cautious and lacks a clear legal basis. Despite rising demand for Bitcoin in South Korea, an FSS official stated that the regulator cannot relax its policies regarding cryptocurrency investments.
In response to the FSS prohibition, the Financial Services Commission (FSC) in South Korea will establish a Virtual Asset Committee to oversee the approval of spot crypto ETFs. This committee, led by FSC Vice Chairman Soyoung Kim, will include representatives from government departments and private sector members. The committee will also address the authorization of corporate accounts for crypto investing. South Korea has seen a significant volume of crypto transactions, driven by mistrust of traditional financial systems and efforts from large companies like Samsung in the crypto industry.
While the FSS remains firm on its stance concerning crypto investments, there may be potential changes in the future as the FSC establishes the Virtual Asset Committee. The committee’s role in overseeing spot crypto ETF approvals and corporate accounts for crypto investing could potentially open up new avenues for institutional investment in the South Korean crypto market. With South Korea being a key player in the Eastern Asian crypto market, developments in regulatory policies and guidelines could have a significant impact on the industry as a whole.
In conclusion, South Korea’s financial regulators have taken a restrictive stance on cryptocurrency investments, leading to the rejection of ETFs tracking companies associated with digital assets. The regulatory hurdles have caused uncertainty among asset managers in the country, as they await further guidance from the FSS. However, with the establishment of the Virtual Asset Committee by the FSC, there may be potential changes on the horizon that could open up new opportunities for institutional investment in the South Korean crypto market. The country’s significant transaction volume and growing adoption of decentralized applications highlight its position as a key player in the global cryptocurrency industry.
