South Korea’s Financial Supervisory Service (FSS) has issued informal guidance to local Exchange-Traded Fund (ETF) managers, advising them to limit holdings in crypto-related stocks. This advisory stems from concerns over regulatory ambiguity surrounding cryptocurrency assets and potential risks to market stability.
Several existing ETFs, including the Korea Investment Management Ace US Stock Bestseller and KoACT Nasdaq Growth Active ETFs, hold notable positions in companies like Coinbase. The FSS’s stance poses particular challenges for passive ETFs, which often require approval from index providers to adjust their holdings.
The guidance creates tension between adhering to regulatory expectations and following established investment mandates tied to underlying indices. Analysts suggest that this domestic caution may push South Korean investors towards seeking exposure through U.S.-listed cryptocurrency ETFs instead.
Despite the FSS’s cautious approach, indicators point towards growing institutional interest in cryptocurrencies within South Korea’s financial system. Initiatives aimed at relaxing certain digital asset restrictions and fostering innovation remain underway.
Retail investor engagement with cryptocurrencies also appears robust, with reports indicating approximately 27% of South Koreans aged 20 to 50 hold some form of crypto assets.