- South Korea bans ETFs tied to crypto firms like Coinbase, citing strict 2017 regulations and investor protection.
- Legal experts criticize South Korea’s FSS for blocking crypto ETFs without clear legal backing or transparent guidelines.
- A new Virtual Asset Committee aims to reshape South Korea’s crypto oversight amid rising global crypto adoption.
South Korea’s Financial Supervisory Service has blocked the launch of exchange-traded funds tied to cryptocurrency companies. This decision reinforces the government’s restrictive stance on digital asset investments.
Yesterday, reports from local media indicated that the FSS had prohibited asset managers from introducing ETFs. The policy is grounded on a 2017 government order that bans financial firms from participating in activities related to virtual assets.
Bitcoin ETFs Remain Prohibited
The FSS has also maintained its ban on Bitcoin spot and futures ETFs. These restrictions align with the South Korean Capital Markets Act, which limits cryptocurrency-related investment products. This policy effectively sidelines institutional investment opportunities in the country.
Asset management firms have faced significant challenges due to these restrictions. In addition, one firm revealed its plans to launch a Coinbase-focused ETF were stalled indefinitely. According to a representative, the firm is prepared to proceed but requires regulatory approval.
Other companies have also reconsidered their plans for ETFs. One firm cited the rejection by FSS of similar products as a reason for its hesitation. Industry participants have expressed frustration over the lack of clear regulations.
Legal and Market Concerns
Legal experts have questioned the FSS’s approach, calling it overly cautious and legally unsupported. Jung Soo-ho, a partner at Renaissance Law Firm, stated that investments in publicly traded firms like Coinbase do not violate the Capital Markets Act. He argued that the FSS’s actions represent regulatory overreach.
Despite the rising demand for Bitcoin in South Korea, the FSS shows no signs of easing its stance.
New Committee to Address Crypto Oversight
The Financial Services Commission plans to establish a Virtual Asset Committee to oversee crypto-related matters. This committee will focus on the approval of spot crypto ETFs and corporate accounts for crypto investments. It includes government representatives and private sector members, aiming to provide a comprehensive framework.
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