South Korea’s Regulatory Body Rejects Crypto-Linked ETFs
The Financial Supervisory Service (FSS) in South Korea has taken a hard stance against cryptocurrency-related exchange-traded funds (ETFs), citing a government directive dating back to 2017.
Key Points:
- The FSS has prohibited asset managers from launching ETFs focused on companies like Coinbase.
- This decision extends to Bitcoin spot and futures ETFs due to the Capital Markets Act.
- Domestic asset managers are facing regulatory hurdles and delays in launching crypto-linked ETFs.
Challenges Faced by Asset Managers
Asset managers in South Korea are currently at a standstill due to the FSS’s restrictions on ETFs investing in virtual asset firms. Despite being prepared to launch ETFs focused on companies like Coinbase, regulatory approval remains elusive.
“We’re prepared to launch immediately once we secure regulatory approval.”
Other firms considering blockchain-focused ETFs are also hesitant to move forward without clear guidance from the FSS, leading to a cautious approach within the industry.
Legal and Regulatory Concerns
Local market participants have criticized the FSS’s cautious approach, with some arguing that investments in publicly traded companies like Coinbase do not violate existing laws. Jung Soo-ho, Managing Partner at Renaissance Law Firm, highlighted the lack of a clear legal foundation for the FSS’s stance.
“While these measures may be intended to protect investors, they essentially function as unwarranted regulatory overreach.”
Despite rising demand for Bitcoin investments in South Korea, the FSS remains firm in its restrictive policies.
Potential Changes in Regulation
While the FSS continues to block crypto-linked ETFs, the Financial Services Commission (FSC) plans to establish a Virtual Asset Committee to explore the approval of spot crypto ETFs.
The committee, led by FSC Vice Chairman Soyoung Kim, will include representatives from government departments and private sector members to oversee the crypto industry and address corporate accounts for crypto investing.
South Korea’s significant transaction volume in the crypto market, driven by a mistrust of traditional financial systems and support from companies like Samsung, underscores the importance of regulatory clarity in fostering crypto adoption.
