Financial regulators in South Korea have issued new directives requiring asset managers to limit their investments in crypto-related companies within exchange-traded funds (ETFs).
New Regulatory Directives
On July 23, the Financial Supervisory Service (FSS) confirmed the introduction of new guidelines to limit investments in crypto ETFs, aimed at ensuring adherence to existing restrictions on institutional investments in virtual assets.
Challenges for Institutional Investors
Under current guidelines in place since 2017, regulated financial institutions in South Korea are prohibited from directly holding, purchasing, or investing in companies related to the crypto industry. This creates a disadvantage for institutional investors compared to retail participants who can more freely access high crypto-exposure ETFs.
Legislative Changes and Investigations
As South Korea considers legislation to legalize spot crypto ETFs and establish regulatory frameworks for these assets, the government is also facing an investigation concerning the former First Lady, Kim Keon-hee, and her connections to market manipulation in the cryptocurrency sector.
The new regulatory measures and attempts to regulate cryptocurrency in South Korea reflect an effort to mitigate risky investments for institutional investors while creating challenges in the financial market.
