South Korea’s Financial Investment Association (KOFIA) has vowed to push for the approval of cryptocurrency exchange-traded funds (ETFs) in the domestic stock market “this year,” according to local media reports.
KOFIA chief Seo Yoo-seok reportedly said in a Feb. 5 press conference that there is a growing appetite for cryptocurrencies among investors over 50, warning that direct exposure to cryptocurrencies could pose risks. Instead, regulated financial products based on Bitcoin and Ethereum could offer a safer alternative.
His remarks come amid a shift in the global crypto landscape following Donald Trump’s US presidential election victory. South Korea has since observed a 450% spike in new crypto exchange registrations, with nearly half of the applications belonging to individuals aged 40 and above.
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The nation’s Financial Services Commission does not recognize cryptocurrencies as underlying assets for securities under the Capital Markets Act, thereby restricting crypto-backed ETFs.
In October 2024, South Korea launched a virtual asset committee to reevaluate the permissions for corporate crypto accounts and crypto ETFs. A recent committee meeting concluded with officials reporting that reviews on corporate trading accounts are nearing completion.
South Korea’s FSC, under Chairman Kim Byung-hwan, is evaluating possibly easing restrictions on corporate crypto accounts. Source: FSC
South Korea is home to one of the world’s most active cryptocurrency markets, with its local currency surpassing the US dollar as the most traded fiat against crypto in the first quarter of 2024.
However, the nation’s cryptocurrency activity is heavily dependent on its retail investors due to its strict Anti-Money Laundering requirements that mandate exchanges to establish an official partnership with a local bank to offer crypto-to-fiat services.
To open a crypto-to-fiat account with one of the exchanges that meet these requirements, investors must open what’s called a real-name account with a local bank, which is basically a financial account verified by the citizen’s legal identity. As an individual’s legal identity is required to open a cryptocurrency account, corporations and institutions have effectively been fenced out from participating in cryptocurrency trading.
Only five exchanges have established a partnership in South Korea since the requirements were introduced in 2018.
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