FSC Plans- Spot Crypto ETFs: South Korea’s Potential Regulatory Change
FSC Plans– South Korea’s financial regulatory authority, the Financial Services Commission (FSC), has announced plans to reevaluate its ban on local spot cryptocurrency exchange-traded funds (ETFs) and institutional accounts on crypto exchanges. This move represents a significant shift in the FSC’s stance toward digital assets, indicating a possible opening up of the market for cryptocurrencies in the country.
New Committee to Review Digital Asset Policies
In its annual audit report, the FSC mentioned the establishment of a new cryptocurrency committee, aimed at discussing and formulating policies related to digital assets. According to local news agency News1, this committee will be tasked with reviewing the existing ban on local spot crypto ETFs, a notable change from the regulator’s previously strict opposition to integrating digital assets into traditional financial markets.
The FSC’s reconsideration comes on the heels of the U.S. approval of spot bitcoin ETFs in January. Despite that development, the South Korean regulator had previously reaffirmed its decision to maintain the ban on local crypto ETF listings, citing concerns over potential risks to the stability of the financial market. However, increasing calls for regulatory change from local legislators may influence the FSC’s future actions.
Legislative Pressure for Change
In recent months, lawmakers from the winning Democratic Party and the opposition have urged the FSC to reconsider the ban on spot bitcoin ETFs, pledging support for such measures during their election campaigns. In May, the left-wing party stated its intention to formally request the FSC to review the current restrictions on crypto ETFs.
Since 2018, institutional investors in South Korea have faced significant hurdles in establishing cryptocurrency trading accounts due to strict regulations imposed by the FSC. This has hindered the growth of institutional participation in the rapidly evolving cryptocurrency market.
Investigating Market Monopoly and Financial Relationships
In addition to examining the possibility of lifting the ETF ban, FSC Chairman Kim Byung-hwan announced an investigation into the monopolistic nature of South Korea’s digital asset exchanges, particularly the dominance of Upbit. According to CoinMarketCap data, Upbit accounted for over 61% of the trading volume in the past 24 hours, processing more than $1.17 billion. Its market share had even reached an average of 80% in March.
This scrutiny came in response to concerns raised by Democratic Party lawmaker Lee Kang-il regarding Upbit’s significant influence over K-bank, a partner bank that manages user deposits for cryptocurrency exchanges. Lee highlighted that Upbit’s deposits constituted approximately 20% of K-bank’s total deposits, warning that any disruption in the partnership could lead to a potential bank run.
K-bank, one of South Korea’s first digital banks, is currently preparing for an initial public offering (IPO). Local news reports have indicated that the bank’s heavy reliance on Upbit poses risks to its plans for going public.
FAQs
What is the Financial Services Commission (FSC) planning to do regarding cryptocurrency ETFs in South Korea?
The FSC plans to reevaluate the existing ban on local spot cryptocurrency exchange-traded funds (ETFs) and institutional accounts on crypto exchanges. This decision comes as part of their annual audit and is driven by a new cryptocurrency committee aimed at discussing digital asset policies.
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