South Korea’s main financial regulator, the Financial Services Commission (FSC), is reportedly initiating a review process to reconsider its position on the ban on cryptocurrency exchange-traded funds (ETFs).
This comes after the regulator formed a new cryptocurrency advisory committee, signaling a possible shift from its previous, stricter stance on digital asset exposure in traditional financial markets.
The committee is charged with re-evaluating current regulations that prevent stock exchange listings spot crypto ETFs in the country.
Reason for the revision to dissolve Crypto ETFs
Notably, the report from a local news agency, News1, revealed this update on South Korea’s efforts to lift the ban on spot ETFs. News1 wrote in the report:
The Financial Services Commission has announced its intention to review the approval of spot listed index funds (ETFs) for virtual assets and the authorization of corporate virtual asset accounts through the Virtual Asset Committee.
According to News1, the South Korean supervisor reassessed its stance on spot crypto ETFs because of ‘constant voices asking for correction’. The report read:
In the United States, spot ETFs of Bitcoin and Ethereum are listed and traded, but in Korea, virtual asset ETFs are blocked. Moreover, opening and trading accounts for corporate virtual assets is also prohibited, and there are constant voices calling for correction.
Meanwhile, in addition to reviewing the ban on crypto ETFs, FSC Chairman Kim Byung-hwan has indicated that the regulator will also investigate the “monopolistic structure” of South Korea’s digital currency exchanges, with a particular emphasis on Upbit, which currently dominates the market.
Of the five fully licensed cryptocurrency exchanges in South Korea, Upbit controls a significant portion of trading volume, accounting for more than half of the market.
This dominance has raised concerns among lawmakers supervisorswith Democratic Party lawmaker Lee Kang-il drawing attention to Upbit’s close financial relationship with its partner, K-bank.
South Korean regulations require digital currency exchanges to maintain user deposits through partner banks, and K-bank has played a crucial role in facilitating Upbit’s operations.
Lee highlighted that Upbit’s deposits represent 20% of K-bank’s total deposits, raising concerns about the potential financial risk for K-bank, especially in the event of a disruption of their partnership.
What this means for the market
It is worth noting that the review of South Korea’s crypto ETF ban and investigation into the country’s dominant exchange could lead to significant changes in the local digital asset market.
If the ban on spot crypto ETFs is lifted, it would mark a notable shift in South Korea’s regulatory approach to cryptocurrencies, opening up new opportunities. investment opportunities for institutional and private investors.
However, the outcome of the review remains to be seen as the regulator continues to weigh the potential risks to market stability.
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