South Korea Authorities Block Bitcoin Spot and Futures ETFs, Here’s Why

Bitcoin spot and futures ETFs remain blocked in South Korea, with financial authorities maintaining strict regulatory controls over cryptocurrency-related investment products. In a move that has raised eyebrows, the Financial Supervisory Service (FSS) has also barred the launch of ETFs that invest in companies tied to virtual assets, including major global firms such as Coinbase.

South Korea Authorities Block Bitcoin Spot and Futures ETFs

The South Korean Financial Supervisory Service has maintained its stance against Bitcoin spot and futures ETFs, frowning upon attempts to launch funds tied to firms with exposure to cryptocurrencies. Asset management companies trying to take advantage of the increasing demand for virtual assets have encountered many challenges.

An executive in one of the firms added, “We were planning to roll out an ETF that would be investing in Coinbase but the FSS said we can’t for the time being.” The asset manager said that the ETF had been designed and was waiting to be approved but regulatory issues prevented its launch.

As of now, any ETF in South Korea has to undergo securities review by the FSS. However, industry insiders say that no cryptocurrency-related fund has been able to get approval from the government to start its operations due to the current policy regime. This decision comes despite BTC’s price prediction to hit $200k after hitting an all-time high of $94,250.

Legal Basis for Restrictions Questioned

Critics have also accused the FSS of blocking Bitcoin spot and futures ETFs as well as funds investing in virtual asset companies without legal justification.
The restrictions come after the “Virtual Currency Emergency Measures” that were put into place in 2017 that barred financial companies from participating in virtual asset business.

According to legal professionals, this type of regulation is no longer effective and is also too general. Jeong Su-ho, a lawyer at Renaissance Law Firm, said: “Restricting investments in listed companies such as Coinbase is beyond the jurisdiction of the Capital Markets Act.”

Subsequently, this move differs from the U.S. Commodities and Futures Trading Commission (CFTC) decision for the approval of spot Bitcoin ETF options trading. Critics also argue that the government’s justification of investor protection is insufficient without proper legislative backing.

Global Markets Embrace Crypto ETFs

While South Korea tightens restrictions, global financial markets are making strides in cryptocurrency-related investment products. In the United States, Bitcoin spot and futures ETFs are not only operational but continue to expand in scope. For instance, Nasdaq recently launched options trading for BlackRock’s iShares Bitcoin Trust ETF, creating new investment opportunities for traders.

Leveraged ETFs tied to cryptocurrency firms, such as Coinbase, have also gained traction in the U.S. In 2022, one such fund was approved, recording strong trading volumes. Financial analysts believe these developments reflect a maturing global market for Bitcoin and related financial products.

Todd Sohn, an ETF strategist, noted, “The rapid development of cryptocurrency ETFs globally demonstrates investor demand and the potential for market growth.”

The FSS’s continued opposition to Bitcoin spot and futures ETFs, as well as funds tied to virtual asset companies, has raised concerns about South Korea’s position in the global financial landscape. Critics worry that the nation’s restrictive policies could leave it lagging behind more progressive markets like the U.S. and Europe.