A report from The Korea Herald said that South Korea’s Financial Supervisory Service (FSS) recently instructed local asset management firms to adjust their exchange-traded funds to limit exposure to crypto-related companies like Coinbase and Strategy.
The Korea Herald reported Wednesday that the FSS verbally gave such directions to a number of companies earlier this month. The regulator reportedly stated that asset managers need to comply with the Financial Services Commission’s (FSC) administrative guidelines issued in 2017, which prohibit regulated financial institutions from holding, purchasing, or making equity investments in virtual assets.
This directive from the local regulator sparked complaints among domestic financial players. They argue it creates an uneven playing field since retail investors can access U.S. ETFs with exposure to crypto companies.
An FSS official reportedly stated that institutions need to abide by the existing guidelines until they adopt new regulations, even if the U.S. and South Korea make regulatory changes.
The FSS regulates the country’s financial sector, focusing on practical, day-to-day oversight of various financial entities. It acts as the executive arm of the FSC, South Korea’s top financial regulator.
Shifting Tides
South Korea has discussed similar measures to ease some of its strict regulations on crypto and institutional involvement ever since the U.S. government shifted to a friendlier stance towards crypto under President Donald Trump.
Earlier this year, the country began to phase out its de facto ban on institutional trading. The election of pro-crypto President Lee Jae Myung accelerated this paradigm shift, as he pushes to enable the local issuance and launch of spot crypto ETFs and strengthen the Korean won market with local currency-based stablecoins.
South Korea houses one of the largest crypto markets in the world, and its retail investors are known for their altcoin-heavy trading strategies. As of the end of last year, 18.25 million crypto investors were present in South Korea, according to the Bank of Korea.
