On November 20, 2024, South Korea's Financial Supervisory Service (FSS) intensified its restrictive measures on cryptocurrencies by rejecting the launch of exchange-traded funds (ETFs) linked to digital assets. This decision, rooted in a 2017 government directive, halts asset managers from introducing ETFs focused on firms such as Coinbase, sidelining a crucial pathway for institutional investment.
The FSS's prohibition on Bitcoin (BTC) spot and futures ETFs, as stipulated by the South Korean Capital Markets Act, has placed local asset managers in a state of uncertainty. A representative from one management firm indicated that efforts to launch a Coinbase-focused ETF have been indefinitely stalled, despite their readiness to proceed upon securing regulatory approval.
Market participants have criticized the FSS's approach as overly cautious and lacking a solid legal foundation. Jung Soo-ho, Managing Partner at Renaissance Law Firm, argued that investments in companies like Coinbase do not contravene the Capital Markets Act, suggesting that the FSS's actions represent unwarranted regulatory overreach.
In response to rising demand for Bitcoin investments, the Financial Services Commission (FSC) will establish a Virtual Asset Committee, led by Vice Chairman Soyoung Kim. This committee aims to address the approval of spot crypto ETFs and the authorization of corporate accounts for crypto investing.
According to Chainalysis, South Korea recorded approximately $130 billion in crypto transaction value from 2023 to 2024, making it the leading Eastern Asian country in this regard. This substantial volume is fueled by a general mistrust of traditional financial systems and bolstered by the involvement of major corporations like Samsung in the crypto sector.