South Korea’s Financial Services Commission (FSC) maintained a firm stance on the Crypto ETF ban despite the approval of Spot Bitcoin ETFs in the United States. The FSC officials asserted that the U.S. developments were not deemed significant in their regulatory landscape. Moreover, they stated that the U.S. ETF approval would change nothing in the South Korean crypto regulations.
Why Is South Korea Against Crypto ETFs?
The South Korea FSC expressed ongoing concerns over illicit fund outflows, money laundering, and potential speculative losses. The officials noted that these factors contributed to their decision to uphold the December 2017 ban on financial institutions from investing in crypto wouldn’t be eased. This would indeed prevent the advent of Crypto ETFs in the country.
An FSC official stated that even the U.S. Securities and Exchange Commission (SEC) ‘reluctantly’ approved Spot Bitcoin ETF proposals. According to a South Korean news report, the official said, “The SEC also reluctantly allowed virtual asset ETFs on a limited basis in response to the court decision.”
Earlier, the regulatory body actively solicited public feedback until February 13, 2023, to promote inclusivity in decision-making. This collected input will be important in shaping their approach to crypto, with a thorough review scheduled for the first half of 2024.
As part of its rigid mission to oversee the crypto industry, the FSC introduced proposals aimed at reinforcing responsible practices and safeguarding users. Among these proposals was a ban on credit card usage for purchasing digital currencies. This indicated a move towards greater scrutiny of financial instruments associated with the crypto market.
Additionally, the FSC recently advocated for stringent rules for cryptocurrency exchanges. The agency proposed that these platforms would have to store a massive 80% share of customer deposits in cold wallets. Furthermore, the FSC recommended imposing fees on customer withdrawals to encourage financial prudence.
Also Read: ARK Invest President Upbeat On Bitcoin ETF Pricing Even After Fee Waiver Ends
U.S. Mirrored The South Korea Crypto Regulations?
The country actively implemented two crypto regulatory plans recently. The first one is already in effect from 2023 while the second is slated to be implemented in July 2024. Both plans were designed to establish transparent rules governing the issuance, listing, and delisting of cryptocurrencies.
Furthermore, a South Korean official reflected on the aftermath in the U.S. after major crypto market fluctuations. They pointed out that the country prevented a “financial sector collapse* by prohibiting financial institutions from investing in virtual assets.
They asserted that the aforementioned move by the U.S. mirrored South Korea’s cautious approach. Moreover, they noted that the Crypto ETF ban is necessary since officially recognizing crypto investments might weaken the demand base of the domestic stock market.
Also Read: SEC Gives Nod to Spot Bitcoin ETF, Opens Door for Trading
