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- South Korea tightens rules on ETFs tied to crypto firms.
- Asset managers ordered to reduce exposure to Coinbase, Strategy.
- Retail investors unaffected as institutional restrictions remain in force.
South Korea’s financial authorities have issued new instructions to local asset management firms regarding crypto-related investments. The Financial Supervisory Service (FSS) has reportedly demanded that firms reduce their exposure to exchange-traded funds tied to crypto companies.
According to The Korea Herald, this guidance was delivered verbally to several firms earlier in July. It is primarily aimed at U.S. stocks, such as Coinbase and Strategy, which have large holdings in digital assets. The FSS warned companies that they must adhere to the 2017 rules provided by the Financial Services Commission (FSC).
These policies prohibit financial institutions from directly buying, holding, or investing in virtual assets or crypto-related stocks. Although the world is changing its attitudes towards the issue, South Korea is insisting on total compliance until new acts come along. The FSS’s action has caused uneasiness in the financial sector.
Also Read: JPMorgan Chase Plans to Offer Crypto-Backed Loans Amid Regulatory Shift
Asset managers state that the directive unjustly restricts access to institutional investors, as there is no such limitation to retail investors. This, they say, creates a false investment climate in which institutions face punishment even as more people around the world are using crypto. Firms have demanded clarity due to the widened discrepancy between local and global standards.
Regulatory Enforcement Clashes With Evolving Crypto Landscape
An FSS official explained that the current regulations will remain pending a change in the laws. Firms are projected to adhere to the current limitations until South Korea promulgates new rules. The strategy is offered despite the U.S. and other countries strengthening institutional involvement in the digital asset ecosystem.
In recent months, President Lee Jae Myung has led South Korea’s shift toward crypto-friendly policies. His management has been unopposed in promoting local issuance of spot crypto ETFs and the development of won-pegged stablecoins. However, the most recent order shows that regulators are not ready to relax institutional requirements yet.
South Korea still ranks among the leading crypto markets in the world. Last year, there were 18.25 million active crypto investors among the country’s total population. A large number of them prefer altcoins and speculative investments, which promotes the demand for various investment products. Domestic entities have long been championing such opportunities that other companies across the world enjoy.
This indicates that South Korean traditional financial firms should be cautious about crypto-linked ETFs. As policymakers debate the issue, access to their institutions is highly guarded, and many companies are stuck between the options of opportunity and regulation.
Also Read: Ethereum Leads as Crypto Investment Inflows Hit Record $4.39 Billion Weekly
