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The Presidential Office of the Republic of Korea has urged the Financial Services Commission (FSC) to reconsider its anti-ETF stance following the United States (US) Securities and Exchange Commission (SEC) approval.
This move comes just a week after the FSC warned users against trading spot Bitcoin exchange-traded funds (ETFs). On January 18 2024, a local report from Maekyung published that the Presidential Office of South Korea also referred to as the Yongsan Presidential Office, asked the FSC to reconsider the possibility of approving ETFs.
Overview
The Office of the President asked the FSC to refrain from having do or not directives for spot Bitcoin ETFs. In a briefing on Thursday, the chief of staff for policy of the presidential office, Tae-yoon Sung, said, “We are trying to make appropriate changes to the legal system of our country, or to consider whether what happens abroad can be accepted in our country.” Sung added, “Looking beyond the risks associated with trading ETF assets, South Korea is assessing other low-risk aspects of the offering.”
The presidential office’s comment came after the FSC, a principal financial regulator in South Korea, issued a brief press release on January 12 2024, warning local firms that brokerage foreign-listed spot Bitcoin ETFs might be considered illegal in the capital market regulations.
The FSC said that any brokering of overseas-listed Bitcoin spot Exchange Traded Funds may violate the existing government stance on virtual assets and the Capital Market Act.
The Act seeks to develop the national economy by assisting financial innovation and fair competition in the capital market while protecting investors and facilitating the development of the financial investment business by amplifying the capital market’s efficiency, reliability and fairness. Following the announcement by the FSC, several prominent local securities companies suspended trading of existing foreign spot Bitcoin ETFs. The statement also emphasised that the regulatory regime for crypto in Korea is still in its established stages and would review the regulations as things develop overseas.
South Korea’s Crypto Timeline
On December 10 2023, the FSC published a notice highlighting that investors in digital assets must receive interest when depositing their funds into an exchange by July 2024. In the notice, nonfungible tokens (NFTs) and central bank digital currencies (CBDCs) were excluded from the law. However, the regulator also mentioned that there can be exceptions for NFTs. According to the guide, even if the tokens are categorised as NFTs but function as a payment method and are issued in large quantities, they may be included in the digital asset classification. The South Korean regulator also determined the method for handling user deposits for virtual asset operators. According to the notice, the exchanges must separate user deposits and their assets and entrust them to the bank.
The Korean regulator emphasised that virtual asset service providers should sign up for accumulated or insurance reserves. The law also prohibits blocking withdrawals or deposits unless requested by courts and financial regulators or if it’s necessary. Early December 2023, South Korea asked its users to report unlicensed crypto exchanges offering services to users in the country. On November 23 2023, South Korea’s central bank revealed its objectives to invite 100,000 Korean residents to test out its upcoming CBDC in 2024. The government has been solidifying its regulation of the crypto industry. In July 2023, the country established an interagency investigation unit to combat crypto crimes and protect investors. The unit comprises 30 investigators from seven government agencies and bodies.
Views from Other Countries Regarding ETFs
While South Korea holds a somewhat divided opinion on the possibility of a local spot Bitcoin ETF, Thailand and Singapore have said it is not something they are considering. According to a Bangkok Post article, Thailand’s SEC did not approve local firms launching ETFs. The Monetary Authority of Singapore also told CNA this week that spot Bitcoin ETFs are not granted for offering to local retail investors.
According to regional experts, Hong Kong could be the next hub in Asia to introduce a local spot for Bitcoin ETF. In December 2023, the Securities and Futures Commission (SFC) published two circulars addressing the requirements of ETFs. Last week, the COO of Hong Kong-based crypto exchange HashKey, Livio Weng, announced that ten fund managers, including some backed by Chinese capital, are looking into launching spot Bitcoin ETFs in the city.
Spot Bitcoin exchange-traded fund has added another net 10,667 BTC to their cryptocurrency stacks on their fifth day of trading amid increasing trading volumes. In the past 24 hours, Bitcoin has seen an over $3.5% slide, which may have influenced the move by the presidential office of the Republic of Korea to urge the Financial Services Commission to reconsider its initial stance.