South Korea’s financial watchdog has doubled down on its restrictive stance on cryptocurrencies, rejecting the launch of exchange-traded funds (ETFs) that track companies linked to digital assets.
Local media reported on November 20 The Financial Supervisory Service (FSS), citing policies rooted in a 2017 government directive, has barred asset managers from launching ETFs targeting companies like Coinbase.
The move follows a broader ban on Bitcoin (BTC) spot and futures ETFs under South Korea’s Capital Markets Act, effectively sidelining a vital avenue for institutional investment.
As opposed to global movements
The decision to block ETFs investing in virtual asset companies has put domestic asset managers on hold. A management firm representative revealed that the FSS has halted efforts to launch a Coinbase-focused ETF indefinitely.
The source added:
“We are prepared to launch immediately once we receive regulatory approval.”
The regulatory hurdles have also caused hesitation among other players. Another company considering blockchain-focused ETFs said that even without explicit guidance from the FSS, the rejection of similar products has made them cautious.
Local market participants have argued that the current approach is overly cautious and legally questionable.
Jung Soo-ho, Managing Partner at Renaissance Law Firm, pointed out that investments in listed companies such as Coinbase do not violate the Capital Markets Act, adding that the FSS’s position lacks a clear legal basis.
He added:
“While these measures may be intended to protect investors, they essentially act as an unwarranted regulatory overreach.
Meanwhile, an FSS official stated that the regulator cannot relax its policies even if demand for Bitcoin as an investment increases in South Korea.
Potential change
Despite the FSS ban, South Korea’s Financial Services Commission (FSC) will establish a Virtual Asset Committee to address this issue the adoption of spot crypto ETFs.
The new committee, led by FSC Vice Chairman Soyoung Kim and including representatives from related government departments and nine members from the private sector, will oversee and guide the crypto industry.
In addition, the Virtual Asset Committee will deal with the authorization of corporate accounts for crypto investments.
According to one report According to Chainalysis, South Korea was the East Asian country with the largest crypto transaction value between 2023 and 2024, receiving approximately $130 billion in crypto.
The significant volume is driven by South Koreans’ distrust of traditional financial systems and boosted by the efforts of major companies like Samsung in the crypto industry.
Institutions are widely using decentralized applications in the South Korean crypto market and are playing a fundamental role in cryptocurrency adoption.
