South Korea’s FSS Directs Reduction in Crypto-Linked Equities

“Institutions must comply with existing rules, which explicitly bar ownership or investment in crypto-linked equities… regulatory disparities between jurisdictions, such as the U.S., do not justify non-compliance with domestic mandates,” said an FSS Spokesperson, Financial Supervisory Service, South Korea.

The FSS has reinforced existing regulations, prohibiting crypto-related equities in ETF portfolios, aiming to manage systemic risks. Although specific focus centers on Coinbase, MicroStrategy also faces scrutiny according to some reports. Institutional actors have paused planned ETF launches pending further guidance.

Institutional actors have paused planned ETF launches pending further guidance. Immediate effects include halted plans for Coinbase-focused ETFs, impacting institutional offerings while retail investors retain access to U.S.-listed crypto-equities. Both spot and futures-based crypto ETFs remain banned under the South Korean Capital Markets Act.

The policy maintains a regulatory gap as U.S. and European markets introduce spot Bitcoin ETFs. Some critics argue it creates an uneven playing field, potentially pushing capital offshore. The regulatory landscape remains under scrutiny, with calls for comprehensive reform.

Experts suggest regulatory stances like the FSS’s could hinder financial innovation within South Korea’s sector. Despite the FSS’s current policy, pressures mount for adopting a balanced approach embracing technological advancements without compromising investor protection.