The Financial Supervisory Service (FSS) of South Korea has imposed new restrictions on local asset managers regarding investments in crypto companies through exchange-traded funds (ETFs).
New Restrictions for Asset Managers
The FSS has instructed local asset managers to limit their exposure to cryptocurrency companies within their ETFs. The directive specifically concerns large U.S. crypto firms such as Coinbase and Strategy, which have significant presence in various local ETFs. Recommendations suggest that ETFs should not place excessive emphasis on crypto-related stocks.
Growing Interest in Cryptocurrencies
Despite the rising popularity of crypto investments among over 18 million traders in South Korea, the FSS maintains its 2017 stance prohibiting financial institutions from holding direct investments or using cryptocurrencies as collateral. Some funds, such as the Korea Investment Management ACE US Stock Bestseller ETF, already hold more than 14% of their assets in Coinbase shares.
Conflicting Signals in the Market
The FSS's directive contradicts recent initiatives from the Ministry of SMEs and Startups, which proposed lifting restrictions on tax incentives for crypto firms. Additionally, many South Korean banks are exploring stablecoins. This highlights a gap between investor demand and regulatory policy, where local ETFs face limitations while similar investments in overseas funds remain unrestricted.
The Financial Supervisory Service of South Korea continues to impose stringent regulations on crypto assets despite rising public interest. Conflicts between government initiatives and existing regulations create challenges for local investors.
