South Korea Raises Concerns Over Domestic Securities Firms Brokering Overseas Bitcoin ETFs

South Korea Raises Concerns Over Domestic Securities Firms Brokering Overseas Bitcoin ETFs

The Financial Services Commission (FSC) of South Korea has expressed concerns regarding domestic securities firms that broker overseas-listed Bitcoin spot exchange-traded funds (ETFs). In a notice released on January 12, the regulatory body acknowledged the emerging regulatory regime for the crypto industry in the country but warned that the brokerage services for these foreign ETFs could potentially violate local laws, specifically the Virtual Asset User Protection Act and the Capital Markets Act. The FSC also stated its intention to conduct a comprehensive review of regulations to align them with international practices.

Following the FSC’s warning, several local securities firms, including the securities division of Samsung Group and Mirae Asset Securities, reportedly suspended their brokerage services for these foreign spot Bitcoin ETFs in various countries such as Canada and the United States. This move highlights the cautious approach being taken by domestic firms in response to potential legal ramifications.

The FSC’s warning comes in the wake of South Korean regulators’ renewed ban on crypto investments by financial institutions. Since December 2017, institutional cryptocurrency investments have been prohibited through emergency measures. The country is now implementing a comprehensive crypto regulation initiative that is set to be enforced by July. This regulatory climate suggests that South Korea is not currently open to embracing spot crypto ETFs.

Despite the cautious stance towards spot crypto ETFs, South Korea has recently announced plans to require the declaration of crypto assets by public officials. The Ethics Policy Division disclosed that it will publicly publish the assets held by approximately 5,800 public officials. This move aims to promote transparency and prevent potential conflicts of interest within the public sector.

In contrast to South Korea’s hesitation towards spot Bitcoin ETFs, the United States Securities and Exchange Commission (SEC) approved the launch of 11 such ETFs on January 10. This decision came after years of rejections due to market manipulation concerns. ETFs from issuers like Grayscale and BlackRock quickly gained significant attention, with a trading volume exceeding $4 billion on their first day of trading. However, traditional U.S. firms like Vanguard have chosen to restrict their customers from purchasing these Bitcoin ETFs, citing a misalignment with their investment philosophy.

South Korea’s financial regulatory body, the FSC, is showing caution and raising concerns about domestic securities firms brokering overseas Bitcoin spot ETFs. The potential violation of local laws has prompted local firms to suspend their services in foreign countries. This caution is consistent with South Korea’s broader crackdown on crypto investments by financial institutions. While the country may not currently embrace spot crypto ETFs, it has announced plans to require the declaration of crypto assets by public officials. The contrasting approach in the United States, where spot Bitcoin ETFs have gained regulatory approval, highlights the different regulatory landscapes in different countries.


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