- South Korea’s FSC plans to re-evaluate its ban on local spot crypto ETFs and institutional accounts, signaling a change in regulatory stance.
- The approval of a Spot Bitcoin ETF in the US puts pressure on the FSC to consider local listings, reflecting potential policy changes.
- Upbit dominates the market, processing 61% of trading volume, raising concerns about the impact on its partner K Bank and its IPO plans.
South Korea’s Financial Services Commission (FSC) has announced major changes in its approach to cryptocurrency regulation. The FSC said it would reevaluate its ban on local spot crypto exchange-traded funds (ETFs) and institutional accounts on crypto exchanges. The decision was made as part of a broader discussion on digital asset policy through the newly established Cryptocurrency Committee.
Historically, the FSC has maintained a strict stance on the exposure of digital assets in traditional financial markets. However, the regulator's recent annual audit report revealed that it intends to reconsider its previous decision. This marks a notable shift from previous opposition to cryptocurrencies.
The approval of spot Bitcoin ETFs in the United States earlier this year raises the possibility of change. The success of these financial products has increased pressure on Korean regulators to adapt. While the FSC has reaffirmed its commitment to the existing ban, there are now signs that it will take a more lenient approach to domestic crypto ETF listings.
Investigating the monopoly structure of virtual currency exchanges
In addition to reviewing ETFs and institutional accounts, FSC Chairman Kim Byung-hwan announced plans to investigate the monopoly structure of South Korean digital asset exchanges. Upbit's dominance has raised concerns among regulators and lawmakers alike. Kim's comments were provoked by Democratic Rep. Lee Gang-il, who highlighted Upbit's financial ties with its partner K-Bank.
K Bank, a major player in South Korea's digital banking sector, is increasingly relying on Upbit. Mr. Lee said that Upbit's deposits are 20% This accounts for a portion of K Bank's total deposits, raising alarm over potential risks if the partnership between the two companies is shaken. This dependence could pose a major threat to K-Bank's future initial public offering (IPO) plans, as the neobank's stability depends on its relationship with Upbit.
The potential approval of a local spot ETF could reshape the country's digital asset landscape as South Korea's financial watchdog reevaluates its position on crypto regulation. Amid growing pressure from lawmakers and market participants, the FSC's future decisions will be crucial in determining the future of crypto trading and investment in South Korea. The impact of these changes could extend far beyond the domestic market and impact global digital asset trends and investor sentiment.
