The Democratic Party of Korea is set to request that the Financial Services Commission (FSC) reevaluate its interpretation of the legal status of spot Bitcoin (BTC) exchange-traded funds (ETFs), as stated in a local press report. The party had promised to allow spot ETFs with virtual assets as part of its campaign. An anonymous official from the Democratic Party policy committee informed The Korea Economic Daily that the party intends to make this request after the National Assembly opens in June. The opposition party gained power in South Korea after the April elections and currently holds 175 out of 300 seats in the legislative body.
The FSC released a statement on January 12, stating that domestic securities firms could potentially violate the Capital Markets Act by listing foreign spot BTC ETFs. The United States Securities and Exchange Commission had approved spot BTC ETF trading on January 10. However, the South Korean financial regulator’s stance was not well received, and the previous presidential administration urged the FSC to reconsider its decision on January 18.
According to the prevailing interpretation, virtual assets are not included in the definition of an underlying asset in the Capital Markets Act. The official mentioned to the newspaper that amending the act would require several steps and could take months at best. Additionally, discussions on the second stage of the 2020 Virtual Asset Business Rights Act are expected to begin in the second half of the year.
Hong Kong recently started trading spot BTC and Ether (ETH) exchange-traded funds on April 30, which has raised hopes for the establishment of a similar market in South Korea, despite the modest performance of the Hong Kong ETFs.
Since the passing of the 2020 act, South Korean regulators have been tightening their control over the cryptocurrency market. Tougher sentences for crypto-related crimes have been implemented, and new guidelines for cryptocurrency exchanges have been issued. South Korea’s crypto universe has been deemed unique and remarkable in a magazine publication.