South Korea's Financial Investment Association (KOFIA) has announced its intention to push for the approval of cryptocurrency exchange-traded funds (ETFs) in the domestic stock market “this year,” according to local media reports.
KOFIA chief Seo Yoo-seok stated in a February 5th press conference that there is a growing interest in cryptocurrencies among investors over 50, highlighting the potential risks of direct exposure to cryptocurrencies. He suggested that regulated financial products based on Bitcoin and Ethereum could provide a safer alternative.
This announcement comes amidst a shift in the global crypto landscape following Donald Trump's US presidential election victory. South Korea has witnessed a 450% surge in new crypto exchange registrations since then, with nearly half of the applications originating from individuals aged 40 and above.
The nation's Financial Services Commission currently does not recognize cryptocurrencies as underlying assets for securities under the Capital Markets Act, hindering the development of crypto-backed ETFs.
In October 2024, South Korea established a virtual asset committee to reassess permissions for corporate crypto accounts and crypto ETFs. Recent committee meetings have indicated that reviews on corporate trading accounts are nearing completion.
South Korea boasts one of the world's most active cryptocurrency markets, with its local currency surpassing the US dollar as the most traded fiat against crypto in the first quarter of 2024.
However, the nation's cryptocurrency activity is heavily reliant on retail investors due to strict Anti-Money Laundering requirements that necessitate exchanges to establish partnerships with local banks for crypto-to-fiat services.
To open a crypto-to-fiat account with one of the exchanges meeting these requirements, investors must open a real-name account with a local bank, which is a financial account verified by the citizen's legal identity. This requirement effectively excludes corporations and institutions from participating in cryptocurrency trading.
Only five exchanges have established partnerships in South Korea since these requirements were introduced in 2018.