What happened?
The Financial Supervisory Service (FSS) in South Korea has advised asset management companies to limit their inclusion of crypto stocks such as Coinbase and Strategy in their ETFs. This guidance comes as a reminder that the 2017 administrative rules regarding virtual currencies remain in force. Despite ongoing deregulation trends in virtual assets in the U.S. and Korea, no new laws have been formalized, requiring adherence to existing guidelines.
Who does this affect?
This affects South Korean asset management firms that handle ETFs, as they need to comply with the guidance to limit crypto-related stocks within their portfolios. It also impacts investors in these ETFs, particularly those interested in crypto exposure through such financial products. The broader industry, including exchanges and mining companies involved in ‘coin theme’ stocks, are indirectly influenced by these restrictions.
Why does this matter?
This guidance could impact the market by reducing the attractiveness and diversity of South Korean ETFs for investors seeking crypto exposure. By curbing crypto stocks in local ETFs, South Korean firms may become less competitive against U.S. ETFs, which already include such assets. Ultimately, the move raises concerns about the effectiveness and fairness of the regulations, as investors might still seek indirect investments via foreign ETFs, potentially leading to capital flows outside the domestic market.