Following the approval of the United States’ first spot Bitcoin ETF, attention has shifted to the Asian market. In South Korea, where cryptocurrencies are highly popular, local financial institutions are currently prohibited from investing in and holding cryptocurrencies. Moreover, the launch of crypto-based exchange-traded funds (ETFs) by financial institutions is also banned, and according to local media reports, this ban will continue despite the US’s spot ETF approval.
Issuance of Spot Bitcoin ETFs to Remain Blocked
After the US Securities and Exchange Commission (SEC) approved the country’s first spot Bitcoin ETF, eyes have turned to different countries around the world that have not yet greenlit ETF issuance. One such country is South Korea, but according to local media reports, the country’s top financial regulator has no plans to pave the way for such an investment vehicle.
South Korea’s top financial regulator told the local news agency Kyunghyang today that it will stand behind the ban that prevents financial institutions from issuing crypto-based ETFs.
An official from the South Korean Financial Services Commission told local news agency Kyunghyang that the approval of spot Bitcoin ETFs in the US does not constitute a reason for the South Korean regulator to lift or reconsider the existing ban. The report cited financial market stability and investor protection as reasons for maintaining the current restrictions.
Cryptocurrencies Not Recognized as a Financial Asset
The country’s capital market law currently limits the scope of underlying assets for investment contract securities like ETFs to financial investment instruments, currencies, and ordinary commodities, excluding cryptocurrencies. South Korea does not currently recognize cryptocurrencies as a financial asset, and since 2017, financial institutions have been prohibited from investing in and holding cryptocurrencies.
On the other hand, South Korea is developing a two-part cryptocurrency regulation, the first part of which was accepted last year and will come into effect in July 2024. The country is building the second part of the cryptocurrency law, which aims to set clear rules regarding the issuance, listing, and delisting of cryptocurrencies.
