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South Korea’s crypto ETF policy is drawing criticism after the Financial Supervisory Service (FSS) issued fresh warnings to asset managers.
According to a report from The Korea Herald, the FSS verbally instructed local firms to cut their exposure to crypto-related companies like Coinbase and Michael Saylor’s Strategy. This instruction aims to reinforce the Financial Services Commission’s (FSC) administrative guidance from 2017. That policy prohibits regulated financial institutions from investing in digital asset equities.
This unexpected move arrives despite recent discussions around easing crypto trading rules in South Korea. While retail investors can freely access U.S.-listed crypto ETFs, local institutional players are now being warned to pull back. The inconsistency has triggered complaints from financial firms, who feel the rule creates an unfair environment.
The warning reportedly came in verbal form earlier this month and has already affected internal portfolio strategies at multiple firms.
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Uneven playing field stirs industry backlash
Many local asset managers say this ruling restricts competitiveness. Retail investors continue to buy crypto-focused U.S. ETFs, yet institutions must follow outdated guidelines. The FSS has stated that these rules will remain in place until new regulations are officially enacted.
The FSS acts as the executive arm of the Financial Services Commission. While the FSC handles top-level regulatory strategy, the FSS focuses on daily oversight. Their recent actions highlight the gap between evolving market conditions and regulatory enforcement.
Despite the regulatory shifts in the U.S. and a changing landscape in South Korea, the current framework remains. The FSS emphasized that institutions must respect the 2017 rule until further notice. This includes avoiding any direct investment exposure to firms like Coinbase and Strategy, even via ETFs.
South Korea crypto ETF policy under industry scrutiny
South Korea’s crypto ETF policy seems to be entering a pivotal moment. While global markets move toward embracing digital assets, local institutions face mounting restrictions. The directive has sparked urgent calls for updated regulations aligned with today’s financial landscape.
Industry analysts say the move could stifle South Korea’s ability to innovate in the digital asset space. With crypto becoming mainstream, keeping institutional players on the sidelines may hurt the market’s long-term development.
As it stands, financial firms are stuck following rules created before the ETF boom and widespread crypto adoption. Unless the FSC updates its guidelines, South Korea risks falling behind.
