South Korea’s Financial Services Commission (FSC) has recently issued a statement that could have significant implications for the local crypto market in its region.
The FSC has indicated that domestic securities firms’ brokering of US spot Bitcoin Exchange-Traded Funds (ETFs) might violate South Korea’s regulations concerning virtual assets and the Capital Markets Act.
This announcement came as a response to the US Securities and Exchange Commission’s (SEC) approval of spot Bitcoin ETFs, a decision the industry has long awaited.
South Korea’s Stance On Crypto
Notably, this FSC’s declaration on brokering US spot Bitcoin ETFs underscores the regulatory divergence between South Korea and the US in their approach to crypto ETFs.
While the US has made a landmark decision by allowing several exchange-traded funds tied to the spot price of Bitcoin to begin trading, after hesitations, South Korea maintains a stance that appears to be more cautious.
The regulator has also recently reiterated its intention to uphold the current restrictions on South Korean financial institutions investing in virtual assets, citing the “stability of financial markets and investor protection” as primary concerns.
A South Korea’s Financial Services Commission representative conveyed to a local media source that the US’s recent endorsement of spot Bitcoin ETFs would not influence the Korean regulatory body to revoke or reassess its current prohibition. The official particularly noted:
It’s hard to say that the SEC’s decision to approve a limited spot ETF is a new case (to the extent that it will change the [South Korea’s] domestic market).
The FSC’s decision to uphold its ban on spot Bitcoin ETFs, despite the US SEC’s approval, reflects South Korea’s regulatory approach to crypto. So far, the country does not recognize digital currency as a financial asset and has prohibited financial institutions from investing in crypto since 2017.
This strict regulatory framework extends to limitations imposed by the country’s Capital Markets Act, which restricts the scope of underlying assets for investment contract securities to exclude crypto.
This recent development is part of a series of measures aimed at regulating the digital currency space in South Korea. Earlier this month, the FSC proposed an amendment to restrict the use of domestic crypto credit cards for purchasing digital currency on foreign exchanges.
Citizen Interest In Crypto
Despite these regulatory hurdles, South Korean citizens’ interest in and belief in the digital currency market remains strong.
A recent report from DeSpread, a Web3 market strategy consulting firm, suggests that the Korean crypto space will comprise roughly 6 million investors, accounting for more than 10% of the population.
This statistic illustrates the growing popularity of digital currency in South Korea, even in the face of stringent government crypto regulations.
Feature image from Unsplash, Chart from TradingView