South Korea’s Financial Services Commission (FSC) has taken a significant step towards the approval of spot crypto exchange-traded funds (ETFs) in the country by establishing a Virtual Asset Committee. This committee, as reported by local media on Oct. 10, will serve as an advisory body tasked with providing oversight and guidance for the crypto industry in South Korea.
Led by FSC Vice Chairman Soyoung Kim, the Virtual Asset Committee comprises representatives from various government departments and nine private sector members. Among the key issues that the committee will address are the approval of corporate accounts for digital assets, a crucial aspect of the South Korean digital asset sector.
Bitcoin (BTC) and other crypto ETFs are currently prohibited under the South Korean Capital Markets Act, including corporate accounts for digital assets due to concerns related to anti-money laundering compliance. However, the establishment of the Virtual Asset Committee signals a potential shift in regulatory stance towards these financial instruments.
In addition to the committee, the FSC has also set up the Digital Asset User Protection Foundation, a non-profit organization aimed at helping users recover assets from service providers that have ceased operations. The regulator is also in the process of reviewing renewal applications for digital asset service providers, with some registrations set to expire in October 2024.
Chairman Kim Byung-hwan, speaking at the National Assembly, emphasized the agency’s dedication to implementing a robust monitoring system as the law safeguarding virtual asset users comes into effect. The FSC is actively investigating vulnerabilities within the trading monitoring system and is enforcing strict measures against unfair trading practices.
Furthermore, the regulator plans to gradually roll out the second phase of legislation, which will introduce additional regulations on the business activities of crypto service providers. This move is part of the FSC’s ongoing efforts to enhance the regulatory framework for cryptocurrencies in the country.
The approval of spot Bitcoin ETFs in South Korea is expected to reduce the “Kimchi premium,” a term used to describe the phenomenon where crypto prices in the country are higher than global averages. This premium is often driven by increased demand for cryptocurrencies within South Korea compared to the rest of the world.
According to CryptoQuant CEO Ki Young Ju, the spot Bitcoin ETF approval will open the market to arbitrage mutual funds and market makers, helping to stabilize prices and minimize the Kimchi premium. This development could have a significant impact on the cryptocurrency market in South Korea and beyond.
In conclusion, the establishment of the Virtual Asset Committee and the Digital Asset User Protection Foundation, along with the FSC’s focus on enhancing regulatory measures, indicate a growing commitment to fostering a secure and transparent crypto industry in South Korea. With the potential approval of spot crypto ETFs on the horizon, the country is poised to further integrate digital assets into its financial landscape.