The Financial Supervisory Service (FSS) of South Korea has urged local financial institutions to limit their investments in crypto firms, specifically mentioning Coinbase and Strategy.
Regulator's Recommendations
According to a report by The Korea Herald, the FSS verbally advised local asset managers to avoid excessive exposure to crypto firms. They clarified that such recommendations are intended to encourage caution in investment flows until new rules are established.
Challenges in Following Recommendations
Passive investment funds, such as ETFs operating in South Korea, cannot easily remove specific stocks without approval from index providers. An anonymous fund manager expressed this by stating, 'Since we track the index directly, removing a stock without an index change could result in large tracking errors. We understand the regulatory stance but cannot respond immediately.'
Growing Interest in Crypto Stocks
Despite the FSS recommendations, South Korean asset managers are increasingly investing in crypto stocks. ETFs such as Ace US Stock Bestseller and KoACT Nasdaq Growth hold significant shares of Coinbase, indicating a rising popularity of crypto stocks among local investors.
The FSS recommendations reflect the current regulatory environment in South Korea, where local financial institutions seek to balance innovation in the cryptocurrency space while adhering to existing regulations.
