March 27, 2024
South Korea's Ruling Party Reverses Course on Spot Bitcoin ETF Pledge
Bitcoin ETF

South Korea’s Ruling Party Reverses Course on Spot Bitcoin ETF Pledge

South Korea’s political landscape regarding cryptocurrency regulation sees a significant shift as the ruling People Power Party opts to indefinitely delay its proposal to relax restrictions on digital assets, including the ban on local spot Bitcoin exchange-traded funds (ETFs). This decision, as reported by local sources, marks a reversal of earlier pledges and underscores challenges in aligning with governmental and financial authorities on cryptocurrency policies.

A report by local media outlet Chosun Biz highlights the complexities surrounding the ruling party’s stance on cryptocurrency regulations. Initial reports had suggested that the People Power Party was formulating election promises aimed at postponing taxation on crypto profits and allowing domestic institutions to introduce spot Bitcoin ETFs, as well as invest directly in cryptocurrencies. However, the party has since removed virtual assets from its policy priorities, delaying the announcement of a virtual asset pledge indefinitely.

The nation’s financial regulator, reaffirming its stance in January, continues to prohibit financial institutions from introducing cryptocurrency ETFs, citing discrepancies with the Capital Markets Act’s specified underlying assets. This stance leaves local investors restricted from accessing spot crypto ETFs, while foreign crypto futures products remain available.

While the United States Securities and Exchange Commission recently approved a spot Bitcoin ETF, South Korea’s Financial Services Commission remains cautious, citing perceived investment risks associated with digital assets.

In contrast, the opposition Democratic Party, which reportedly shared similar pledges regarding crypto ETFs, has officially announced its campaign promises on the matter, ahead of the general election slated for April 10.

According to local reports, the People Power Party had considered a proposal to defer taxation on virtual assets for two years and allow corporate investments in digital assets. However, concerns about inadequate consultation with relevant ministries and potential substantial losses, particularly regarding corporate involvement in digital assets, led to the plan not being finalized as a pledge.

South Korea’s Financial Supervisory Service (FSS), the primary financial regulator, is poised to seek guidance from the U.S. SEC regarding spot Bitcoin exchange-traded funds. FSS chief Lee Bok-hyun has outlined a 2024 business plan, which includes visits to key financial markets like New York in the second quarter, focusing on discussions related to South Korean financial markets and spot Bitcoin ETFs.


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