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South Korea’s Financial Services Commission (FSC) maintains its ban on crypto ETFs for financial institutions. This decision stands, despite the recent <a href="https://news.todayq.com/rbi-chief-das-warns-of-crypto-mania-risks-while-us-approves-etfs/" target="_blank" rel="noopener noreferrer nofollow">approval of spot Bitcoin ETFs</a> in the United States. The FSC cited concerns about the stability of financial markets and the need for investor protection as key reasons for upholding the existing restrictions. What does the FSC have to say? 
The decision comes in the wake of the U.S. Securities and Exchange Commission’s (SEC) approval of the listing and trading of Bitcoin spot ETFs. However, the FSC clarified that this event does not prompt them to reconsider or lift the ban on crypto ETFs in S. Korea.
The Capital Markets Act in South Korea restricts investment contract securities, like ETFs, to financial instruments, currencies, and ordinary commodities. Cryptocurrencies are explicitly excluded from the permissible underlying assets. The country has not recognized cryptocurrencies as financial assets since 2017 and has prohibited financial institutions from investing in them.
A two-part crypto regulation is underway in S. Korea, with the first part passed last year and set to take effect in July 2024. The <a href="https://news.todayq.com/south-koreas-next-phase-of-crypto-regulations-amid-do-kwon-case/" rel="noopener noreferrer nofollow">second part</a> aims to establish clear rules regarding the issuance, listing, and delisting of the digital assets.
FSC official stresses the government’s unwavering stance, barring financial institutions from virtual asset investments for market stability and investor protection. The ban on financial institutions from holding, purchasing, acquiring collateral, and investing in virtual assets was initially announced as emergency measure on December 13, 2017. South Korean FSC remains determined 
The FSC official highlighted that the U.S. decision on spot ETFs is not a novel incident, as the U.S. had previously allowed futures ETFs. Some other countries, including Hong Kong, Germany, and Canada, are already operating spot ETFs. However, the FSC maintains its position, stating that legally, launching a virtual asset ETF is impossible under the current Capital Markets Act.
Financial authorities oppose amending the law to allow virtual assets as ETF underlying assets. They argued that the prohibition on financial institutions investing in virtual assets, similar to the approach taken in the U.S., has contributed to the stability of the financial sector.
<a href="https://news.todayq.com/sec-chairman-gary-gensler-considering-a-broad-regulatory-framework-for-crypto-sector/" target="_blank" rel="noopener noreferrer nofollow">SEC Chairman</a> Gary Gansler clarified that the recent decision only applies to cash exchange-traded products holding Bitcoin. Importantly, he emphasized that it does not signal an intention to approve listing standards for virtual asset securities.
Despite the regulatory divergence, opinions within the industry vary. Kim Jun-woo, CEO of CrossAngle, which operates the virtual asset data platform ‘Xangle,’ suggested considering introducing an ETF for Bitcoin, even with its low volatility. He emphasized the importance of interpreting the U.S. court decision, urging either a proactive stance or reluctant compliance.
S. Korea upholds its crypto ETF ban, emphasizing stability and investor protection, regardless of U.S. approval. Experts within the industry express differing opinions on the potential benefits and risks associated with embracing cryptocurrency ETFs. The ongoing development of crypto regulations in South Korea adds an additional layer of complexity.
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South Korea maintains crypto ETF ban despite US approval

Todayq News

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