South Korean authorities have ordered local institutions to limit their investments in crypto companies’ shares

What’s new? South Korea’s Financial Supervisory Service (FSS) has instructed local asset management companies to adjust their exchange-traded fund (ETF) portfolios to limit the influence of crypto-related companies such as Coinbase and Strategy.

Material by The Korea Herald

What else is known? The Korea Herald reported that the FSS gave verbal instructions to a number of companies earlier this month. The regulator stated the need to comply with the Financial Services Commission (FSC) rules from 2017, which prohibit regulated financial institutions from investing in virtual assets.

The directive has caused discontent among investment companies, which believe it creates unequal conditions, as retail investors can access US ETFs linked to cryptocurrency companies.

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The FSS stated that institutions must comply with existing guidelines until new rules are adopted. The service regulates the country’s financial sector, paying particular attention to the practical day-to-day supervision of various organizations. It acts as the executive body of the FSC, South Korea’s main financial regulator.

When the US government took a more loyal stance toward cryptocurrencies under Trump, South Korea began discussing similar measures to ease regulations governing cryptocurrencies and institutional investor participation.

Earlier this year, the country began gradually lifting its de facto ban on institutional crypto trading. The election of Lee Jae-myung, a supporter of cryptocurrencies, as president accelerated the policy change: he seeks to create conditions for the launch of local spot cryptocurrency ETFs and strengthen the won through stablecoins pegged to the national currency.

South Korea is one of the largest cryptocurrency markets in the world. According to the Bank of Korea, there were 18,25 million crypto investors in the country at the end of last year.

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In October last year, a definition of virtual assets was added to the Foreign Exchange Transactions Act, and the amendments required crypto exchanges to provide transaction data to regulators.

In June of this year, the Democratic Party, led by its new president, introduced a bill to legalize the issuance of stablecoins to stimulate the growth of the cryptocurrency market, and the country’s eight largest commercial banks began developing a won-based stablecoin.

In July, the Ministry of SMEs and Startups proposed granting tax breaks to Korean crypto venture firms.