The Financial Services Commission (FSC) of South Korea is set to reevaluate its long-standing ban on local spot exchange-traded funds (ETFs) and institutional accounts on cryptocurrency exchanges. This decision follows the U.S. approval of spot Bitcoin ETFs earlier this year, creating pressure on the FSC to reconsider its rigid stance. The newly formed cryptocurrency committee, tasked with developing policies on digital assets, will lead this review.
Previously, the FSC maintained the ban to ensure financial market stability, but increasing demands from lawmakers have prompted a reassessment. Both the ruling Democratic Party and opposition parties have indicated their support for lifting the local spot ETF ban as part of their election campaigns.
Upbit Under Scrutiny
The FSC’s strict regulations have largely kept South Korea’s institutional investors from participating in the cryptocurrency market since 2018. FSC Chairman Kim Byung-hwan stated that, in addition to reviewing ETF policies, the commission will investigate the monopolistic structure of virtual exchanges in South Korea, which is heavily dominated by Upbit, accounting for over 61% of trading volume among licensed exchanges.
Concerns have also arisen regarding Upbit’s financial relationship with K-bank, one of the first digital banks in South Korea. Lawmaker Lee Kang-il highlighted that deposits from Upbit represent about 20% of K-bank’s total deposits, raising alarm about potential bank runs should Upbit encounter difficulties. As K-bank plans for an initial public offering, this reliance on Upbit complicates its ambitions, highlighting the complex interplay between traditional finance and the evolving cryptocurrency landscape in South Korea.
As the FSC navigates these challenges, the potential approval of local spot ETFs could significantly impact the future of cryptocurrency investments in the country, aligning South Korea more closely with global trends.
October 2024, Cryptoniteuae
