Bitrabo Editorial
South Korea’s leading financial authority, the Financial Services Commission (FSC), is reportedly starting a review to reassess its prohibition on spot cryptocurrency exchange-traded funds (ETFs).
This development follows the establishment of a new advisory committee on cryptocurrencies, indicating a possible shift in the regulator’s previous strict approach toward integrating digital assets within traditional financial frameworks.
The committee’s objective is to reconsider the rules that currently stop the listing of spot crypto ETFs in South Korea.
Purpose of Reevaluation of the Crypto ETF Ban
According to a report from the local news outlet, News1, this update highlights South Korea’s interest in potentially lifting restrictions on spot ETFs. The report stated:
The Financial Services Commission has revealed its plans to look into the approval of index funds (ETFs) associated with virtual assets and to assess corporate virtual asset accounts through the newly formed Virtual Asset Committee.
News1 noted that the South Korean authorities have reconsidered their position on spot crypto ETFs due to “persistent calls for change.” The report further indicated:
In the U.S., Bitcoin and Ethereum spot ETFs are available for trading, whereas such listings are restricted in South Korea. Additionally, the establishment and trading of corporate virtual asset accounts are not allowed, prompting ongoing demands for rectification.
Alongside the review of the crypto ETF ban, FSC chair Kim Byung-hwan has also mentioned plans to investigate the “monopolistic structure” of cryptocurrency exchanges in South Korea, particularly targeting Upbit, the prevailing exchange in the market.
Of the five licensed cryptocurrency exchanges in the country, Upbit commands a large share of the market, handling over half of the total trading volume.
This market dominance has raised alarms among lawmakers and regulatory bodies, with Democratic Party member Lee Kang-il highlighting Upbit’s close financial ties with K-bank, one of its partner institutions.
Under South Korean regulations, digital currency exchanges must safeguard user deposits through collaborations with banks, and K-bank has been crucial in enabling Upbit’s operations.
Lee pointed out that Upbit accounts for 20% of K-bank’s total deposit assets, raising worries about potential risks to K-bank should their partnership face any disruption.
Implications for the Market
The evaluation of the crypto ETF ban in South Korea and the examination of the leading exchange may lead to considerable shifts in the local digital asset sector.
If the ban on spot crypto ETFs is removed, it would signify a significant change in South Korea’s regulatory stance on cryptocurrencies, creating fresh investment avenues for both institutional and individual investors.
However, the final decision from the regulator remains uncertain as they consider the potential implications for market stability.
Featured image created with DALL-E, Chart from TradingView