South Korea’s Financial Services Commission (FSC) has issued a warning to the US regulators and the crypto market, saying that it may violate the country’s laws and regulations if they allow US spot Bitcoin exchange-traded funds (ETFs) to be listed and traded in South Korea, according to Bloomberg.
The FSC said in a statement on Thursday that it is concerned about the potential impact of US spot Bitcoin ETFs on the stability of the South Korean financial system and the protection of investors. It also said that it plans to review its digital asset rules as overseas regulation changes.
The warning came after the US Securities and Exchange Commission (SEC) approved around a dozen ETFs to directly hold Bitcoin earlier this week, sparking a strong demand from investors. The first batch of US spot Bitcoin ETFs, including offerings from BlackRock Inc. and Fidelity Investments, saw some $4.6 billion of shares change hands in a frenetic Wall Street debut on Thursday.
The news sent shockwaves through the crypto market, as many South Korean crypto-related stocks plunged in early Friday trading. Wizit Co., a leading crypto exchange operator, dropped as much as 13%, and other stocks such as Upbit Co., Coinplug Inc., and Bitget Co. also suffered heavy losses.
FSC Warning Raises Concerns In Crypto
South Korea is known for being one of the most crypto-friendly countries in the world, with a digital assets bill passed last year to bolster investor protection and innovation. However, consumer safeguards have been in focus since the more than $40 billion implosion of tokens created by Do Kwon, a former Samsung executive who was accused of fraud and money laundering.
The FSC’s warning could signal a shift in its stance on crypto assets, which have been subject to frequent crackdowns by the government in recent years. The FSC has previously banned initial coin offerings (ICOs), virtual asset service providers (VASPs), and online gambling platforms involving cryptocurrencies.
The FSC’s warning could also affect the prospects of more crypto ETFs being launched in South Korea or elsewhere, as it may create legal uncertainties and regulatory hurdles for both local and foreign issuers. The SEC has not yet announced whether it will approve any more spot Bitcoin ETFs.
Industry backers see the US spot Bitcoin ETFs as the ultimate springboard for broader mainstream adoption by everyday investors and the catalyst for further gains. However, some analysts warn that there are still many risks and challenges ahead for both the US regulators and the crypto market.
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