David Edwards
South Korea’s Financial Supervisory Service (FSS) has issued verbal guidance to domestic asset managers, instructing them to reduce their exposure in exchange-traded funds to crypto-linked firms such as Coinbase and MicroStrategy.
Delivered earlier this month, the instruction restates adherence to the 2017 administrative rules issued by the Financial Services Commission. According to these regulations, regulated financial institutions are not allowed to own, acquire, or invest in virtual assets directly or through equity exposure.
Local ETF providers have criticized the move, claiming it creates an unfair playing field. Retail investors can still access U.S.-listed exchange-traded funds (ETFs) that provide exposure to crypto-related stocks, despite restrictions on institutional investors. Despite changing strategies in both South Korea and the US, the FSS asserts that institutions must stick to the current regulations until official regulatory revisions are implemented.
The Financial Services Commission’s enforcement arm, the FSS, is in charge of monitoring the nation’s financial industry’s daily activities. Under President Lee Jae-Myung, who has indicated support for legalizing spot crypto ETFs and creating a local stablecoin infrastructure to bolster the Korean won market, this most recent recommendation coincides with a larger regulatory shift.
One of the most active cryptocurrency marketplaces in the world is still South Korea, where a sizable portion of individual investors are altcoins. According to data from the Bank of Korea, 18.25 million Koreans were active in the cryptocurrency market at the end of last year.
