Good News for Bitcoin: South Korea Considers Lifting Crypto ETF Ban

South Korea, known for its strict cryptocurrency regulations, may soon be changing course. During a government audit, the Financial Services Commission (FSC), the country’s main financial regulator, announced the formation of a Virtual Assets Committee. This committee will be tasked with reevaluating the ban on spot crypto ETFs and the possibility for institutions to hold virtual asset accounts.

A Shift on Crypto ETFs

Since 2018, South Korea has banned local institutions from creating cryptocurrency trading accounts and has maintained a ban on ETFs based on digital assets. However, with the rise of spot ETFs on cryptocurrencies like Bitcoin and Ethereum in the United States, South Korean lawmakers, including the ruling Democratic Party, are pushing for these products to be available in the country as well. At least that's what local media reports suggest.

FSC Chairman Kim Byeong-hwan confirmed that the spot ETF ban would be reviewed. If this ban is lifted, it would open the door to a new class of financial products for South Korean institutional investors.

Cryptocurrencies for Institutions

In addition to ETFs, the Virtual Assets Committee will explore the possibility of companies owning virtual asset accounts, which are currently prohibited. This decision responds to growing demand from financial institutions looking to diversify their investments in digital assets in a dynamic region of Asia.

Another priority for the FSC will be reevaluating the dominance of Upbit, which handles over 60% of crypto transactions in the country. This near-monopoly, coupled with the close financial relationship between Upbit and K-bank, raises concerns, particularly about the financial stability of the latter, which is about to go public.

With this review of rules, South Korea could align itself with more open markets like the United States. The approval of crypto ETFs and institutional accounts could strengthen South Korea’s position against a Hong Kong that has already jumped into the ETF race.