The Korean Financial Investment Association (KOFIA) announced its intention to approve cryptocurrency ETFs on the domestic stock market before the end of the year to improve investment conditions in digital assets for the older generation.
KOFIA's Plans and Current Scenario
KOFIA chief Seo Yoo-seok expressed concerns about the direct ownership of cryptocurrencies due to associated risks. He suggested focusing on regulated financial products such as Bitcoin and Ethereum-based ETFs as safer alternatives. This statement comes amid global changes in the crypto landscape following the 2024 US presidential election. In South Korea, a 450% increase in new crypto exchange registrations was recorded, with nearly half of the applications coming from individuals over 40.
Regulatory Environment in South Korea
South Korea's Financial Services Commission currently does not recognize cryptocurrencies as underlying assets for securities under the Capital Markets Act, which limits the creation of cryptocurrency ETFs. In October 2024, a virtual asset committee was launched to reassess permissions for corporate crypto accounts and ETFs. A recent committee meeting concluded with a report that the review of corporate trading accounts is nearing completion.
The Role of South Korean Crypto Market
South Korea is one of the world's most active cryptocurrency markets. In the first quarter of 2024, the local currency surpassed the US dollar in trading volumes against cryptocurrencies. Despite high activity, the market heavily relies on retail investors due to strict Anti-Money Laundering requirements. These requirements mandate exchanges to establish official partnerships with local banks to offer crypto-to-fiat services. As a result, only five exchanges have managed to form such partnerships since 2018.
South Korea remains in the global cryptocurrency spotlight due to its active exchange market and regulatory changes. The approval of cryptocurrency ETFs could be a significant step towards developing secure investment products for a broader range of investors.
