South Korea’s top financial regulator, the Financial Services Commission (FSC), has announced plans to reconsider its ban on spot crypto ETF and institutional accounts on local crypto exchanges. This marks a potential shift from the watchdogโs previous firm stance against the integration of digital assets in the countryโs traditional financial markets.
According to local media outlet News1, the FSC’s new cryptocurrency committee, formed to advise on digital asset policies, will assess the current ban. The move comes as global acceptance of digital assets, such as the approval of spot Bitcoin ETFs in the U.S. earlier this year, continues to grow. Despite the U.S. approval, the FSC had initially upheld the ban, citing concerns about financial market stability.
Political Pressure for Change
South Korean lawmakers have been pushing for a change in the country’s stance on cryptocurrency ETFs. Both the ruling Democratic Party and the opposition made campaign promises to approve local spot Bitcoin ETFs during general elections earlier this year. In May, the winning party reportedly requested that the FSC reevaluate its position on the ban.
Since 2018, the FSC has effectively prohibited South Korean institutional investors from opening cryptocurrency trading accounts on exchanges, enforcing strict guidelines to limit exposure to the volatile digital asset market.
Investigating Market Monopolies: Upbit in Focus
In addition to reviewing crypto ETF and institutional accounts, FSC chair Kim Byung-hwan addressed concerns about the monopolistic structure of South Korea’s digital asset exchanges, which is dominated by Upbit. Data from CoinMarketCap shows that Upbit handled over 61% of the nationโs trading volume in the last 24 hours, processing more than $1.17 billion in trades. In March, Upbit’s market share reached an average of 80%.
During an audit, Kim responded to Democratic Party lawmaker Lee Kang-il, who voiced concerns about the close financial relationship between Upbit and its partner K-bank. Under South Korean regulations, crypto exchanges are required to maintain user deposits through partner banks. Lee highlighted that deposits from Upbit accounted for 20% of K-bank’s total deposits, warning that a disruption in their partnership could lead to a bank run.
K-bank, one of South Koreaโs first digital banks, is planning an IPO. However, reports have raised concerns that its reliance on Upbit could pose risks to its public offering.