South Korea’s democratic opposition party recently suggested a plan to allow local issuing, making available and dealing with Exchange Traded Funds (ETFs), including those tied to Bitcoin and other cryptocurrencies. Nevertheless, the ruling Peoples Power Party has faced considerable opposition to this move. The governing group is wary that these ETF investments can retard the growth of the domestic capital market.
The Financial Services Commission has not made a decision yet on this matter. The result is an ongoing debate expected to continue even after the forthcoming general elections. Democratic Party recommends the integration of digital assets within institutional frameworks as per the global trends. They emphasize the prospect of expanding investment opportunities and fortifying national assets via tax exemptions.
We would allow the issuance, listing, and trading of spot ETFs with Bitcoin and other underlying assets. […] Once the 22nd National Assembly is inaugurated, we will immediately push for revision of the Capital Markets Act, said the Democratic Party’s Policy Committee.
On the other hand, the ruling party alternatively opts for a more cautious approach, expressing concerns about likely capital outflows from the stock market to the much more volatile digital asset market. Some analysts have suggested that this “strategic ambiguity” is a ruling party strategy meant to accommodate varied interests within an election landscape.
There are concerns that if Bitcoin spot ETF investment is allowed, money in the domestic stock market could flow out into the virtual asset market, […] It is an understandable issue, said a key ruling party official.
The Future of Bitcoin ETFs In South Korea
The future of South Korean spot Bitcoin ETF legislation depends on the result of the election and the subsequent political dynamics, given the significant differences between the ruling and opposition parties. Financial authorities have stated that they are open to considering the proposal but have not established a definitive timeline.
The recent approval by the U.S. Securities and Exchange Commission (SEC) for the listing of spot Bitcoin ETFs has led South Korean authorities to caution against brokering ETFs listed overseas, citing potential breaches of existing regulations. This highlights the regulatory challenges and uncertainties surrounding South Korean spot Bitcoin ETFs.
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