Financial Market

FSC: Bitcoin Spot ETF Violates Capital Market Regulations, Futures Remain Unregulated

Glass doors emblazoned with the name of the Financial Services Commission
Glass doors emblazoned with the name of the Financial Services Commission

The Financial Services Commission (FSC) has stated that trading bitcoin spot exchange-traded funds (ETFs) violates domestic capital market regulations in South Korea. However, overseas bitcoin futures ETFs will continue to be traded as usual.

On Jan. 15, the FSC announced that the issuance of bitcoin spot ETFs or the facilitation of overseas bitcoin spot ETFs may potentially violate the existing government stance and domestic capital market regulations. While spot ETF trading has been approved in the United States, domestic implementation is considered challenging.

The FSC emphasized, “This issue is directly linked to the stability of the financial market, the soundness of financial institutions, and the protection of investors. We are closely examining the matter.”

However, it clarified that there are no plans to regulate overseas bitcoin futures ETFs. The commission stated, “Overseas bitcoin futures ETFs will continue to be traded as usual. There are no intentions to regulate them differently.”

Finally, the FSC added, “In the future, we will maintain a close communication system with the industry to consistently and promptly share the authorities’ stance as needed.”

On Jan. 10 (local time), the U.S. Securities and Exchange Commission (SEC) approved the listing and trading of bitcoin spot exchange-traded products (ETPs). ETPs, including ETFs and exchange-traded notes (ETNs), are financial products that allow the trading of various indices or assets like stocks.

On the following day, Jan. 11 (local time), trading bitcoin spot ETFs commenced in the U.S. stock market following their approval. On that day, a total of 11 bitcoin spot ETFs were listed on the stock market, including BlackRock’s iShares bitcoin Trust (IBIT.O), Grayscale bitcoin Trust (GBTC.P), Valkyrie bitcoin Fund (BRRR.O), and ARK 21Shares bitcoin ETF (ARKB.Z).

As a result, expectations arose in the domestic market that approval for bitcoin spot ETFs might follow suit. Within the current domestic legal framework, virtual assets such as bitcoin are not recognized as financial assets. The government prohibits financial institutions from holding, purchasing, obtaining as collateral, or investing in virtual assets.

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