South Korea's Financial Supervisory Service (FSS) has informally warned local asset managers to reduce exposure to cryptocurrency exchange-traded funds (ETFs) and U.S.-listed digital asset firms like Coinbase (COIN) and MicroStrategy (MSTR), citing compliance with a 2017 policy prohibiting regulated institutions from holding digital asset equities. This move signals a tightening stance amid earlier reports of potential regulatory easing.
Concurrently, the Financial Services Commission (FSC) has proposed new regulations to limit crypto stock exposures in ETFs, submitted to the Presidential Committee on Policy Planning. This marks a policy shift from previous bans, aiming to align with global trends like U.S. spot Bitcoin ETF approvals. FSC plans include establishing infrastructure and investor protections, with President Lee Jae-myung advocating mainstream adoption.
The proposal could spur institutional inflows, initially focusing ETFs on Bitcoin with potential expansions to Ethereum and altcoins post-approval. While current enforcement may curb short-term holdings, the long-term framework targets retail markets via mainstream brokers, potentially validating crypto financial products and mirroring capital inflow patterns seen in other jurisdictions.