The Financial Supervisory Service of South Korea (FSS) has once more reaffirmed its prohibition on Bitcoin spot in addition to futures Exchange Traded Funds (ETFs) which has drawn criticism from industry participants and legal practitioners.

This is an element of overhauling regulations which have roughly kept the cryptocurrency market stunted particularly South Korea’s as in comparison with other advanced markets. The dearth of FSS endorsement for such investment vehicles has major consequences to the financial scene of the country.

Regulatory Stance On Bitcoin Stays Firm

The FSS’s recent declaration demonstrates its continued commitment to stringent regulations governing cryptocurrency investments. Despite increasing global adoption of Bitcoin ETFs, South Korea stays hostile. The FSS has not only prohibited the event of Bitcoin spot and futures ETFs, but it surely has also restricted funds related to outstanding cryptocurrency firms reminiscent of Coinbase.

This decision is predicated on measures implemented in 2017 to scale back the financial risks connected with virtual assets. Nevertheless, detractors say that these regulations are outdated and lack legal basis within the contemporary situation.

An official at an asset management firm voiced frustration, noting: “We were able to launch an ETF investing in Coinbase, however the FSS said we are able to’t for now.”

This opinion reflects a broader concern amongst financial organizations that South Korea is passing up lucrative investment prospects as other countries embrace cryptocurrency-related products.

Legal Concerns And Criticism

Legal experts have opined that the actions taken by the FSS are beyond its purview under the Capital Markets Act. In accordance with Jeong Su-ho, an attorney with Renaissance Law Firm, excluding investments in public enterprises like Coinbase right into a slate for prohibition has a powerful legal basis.

He argues that while the FSS claims to guard investors, its method could be a case of regulatory overreach as an alternative of actual investor safety.

Within the banking industry of South Korea, this regulatory structure has discouraged creativity. In the dearth of clear guidelines and support, many asset managers are wary to go looking for fresh digital currency products fearing rejection by the FSS.

Global Context And Future Implications

Other markets are growing while South Korea’s rules get stricter. Investors are getting more opportunities in places just like the US by offering more Bitcoin ETFs and other similar financial instruments. Nasdaq’s recent start of trade options on BlackRock’s iShares Bitcoin Trust ETF shows that cryptocurrencies have gotten more accepted within the financial world.

In South Korea, financial authorities have banned #Bitcoin spot and futures ETFs.

Additionally they recently rejected the launch of funds investing in Bitcoin-related firms like Coinbase, citing investor protection as the explanation.

Thanks for shielding us! @fsckorea

— Ki Young Ju (@ki_young_ju) November 20, 2024

Ki Young Ju, founder and CEO of CryptoQuant, says that these rules are supposed to protect investors. Nevertheless, individuals who disagree with them say that they’re too strict and keep the country from following global trends in how digital assets are regulated.

The disparity between South Korea’s restrictive rules and the openness of other markets raises questions on the country’s global financial competitiveness. As demand for Bitcoin rises, industry stakeholders are concerned that South Korea’s inflexible approach would end in wasted probabilities for growth and innovation.

Because the FSS maintains its ban on Bitcoin spot and futures ETFs, the necessity for more flexible regulations grows. As global markets adapt, South Korea must reevaluate its technique to avoid falling behind within the fast-changing world of cryptocurrency investing.

Featured image from CNBC, chart from TradingView