South Korea’s top financial regulator, the Financial Services Commission (FSC), has reiterated its stance against allowing financial institutions to launch cryptocurrency exchange-traded funds (ETFs). According to an FSC spokesperson, the recent approval of spot bitcoin ETFs in the U.S. is not a reason to reconsider the ban on crypto ETFs in South Korea. The official cited the stability of financial markets and investor protection as reasons to maintain the current restrictions.

South Korea’s Capital Markets Act currently limits the underlying assets for investment contract securities, such as ETFs, to financial investment instruments, currencies and common commodities. Cryptocurrencies are not recognized as financial assets in South Korea and financial institutions have been prohibited from investing in cryptocurrencies since 2017.

The FSC’s decision to maintain its ban on cryptocurrency ETFs is in line with its cautious approach to regulating cryptocurrencies. South Korea is currently drafting a two-part cryptocurrency regulation, the first of which was passed last year and is set to take effect in July 2024. The second part of the cryptocurrency law aims to establish clear rules regarding the issuance, listing and delisting of cryptocurrencies.

The FSC’s stance on cryptocurrency ETFs contrasts with the regulator’s recent trend of approving spot bitcoin ETFs in the US. On January 10, the U.S. Securities and Exchange Commission (SEC) approved 11 spot bitcoin ETFs, marking a major milestone for the cryptocurrency industry.