South Korea’s top financial regulator, the Financial Services Commission (FSC), has reiterated its stance against allowing financial institutions to launch cryptocurrency exchange-traded funds (ETFs). According to a FSC official, the recent approval of spot Bitcoin ETFs in the United States does not warrant a reconsideration of the ban on crypto ETFs in South Korea. The official cited the stability of the financial markets and investor protection as reasons for upholding the current restrictions.
South Korea’s Capital Markets Act currently limits the scope of underlying assets for investment contract securities, such as ETFs, to financial investment instruments, currencies, and ordinary commodities. Cryptocurrencies are not recognized as financial assets in South Korea, and financial institutions have been prohibited from investing in crypto since 2017.
The FSC’s decision to maintain the ban on crypto ETFs is in line with its cautious approach to regulating cryptocurrencies. South Korea is currently developing a two-part crypto regulation, with the first part passed last year and set to go into effect in July 2024. The second part of the crypto act aims to establish clear rules regarding the issuance, listing, and delisting of cryptocurrencies.
The FSC’s stance on crypto ETFs is in contrast to the recent trend of regulatory approvals for spot Bitcoin ETFs in the United States. On January 10, the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs, marking a significant milestone for the cryptocurrency industry.
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