South Korea’s Presidential Office urges local regulators to reconsider stance on Bitcoin ETFs

South Korea’s Presidential Office has urged the country’s Financial Services Commission (FSC) to refrain from outright banning or allowing Bitcoin exchange-traded funds (ETFs). Instead, the office said the Commission should study if foreign offerings could apply to its domestic markets.

According to a local report from Maekyung Media Group, the Office of the President of the Republic of Korea (Yongsan Presidential Office) issued this statement a week following the FSC’s warning to domestic firms against brokering overseas-listed Bitcoin spot ETFs. The FSC said at the time that such services “may violate” the country’s current policy on virtual assets under the Capital Markets Act. 

This move towards tighter regulatory oversight of crypto services resulted from investigations from the Financial Intelligence Unit (FIU), which operates alongside the FSC. The FSC is Korea’s top financial regulator focused on fair competition and innovation.

“We are trying to make appropriate changes to the legal system of our country or to consider whether what happens abroad can be accepted in our country,” shares Tae-yoon Sung, head of the policy office at the Yongsan Presidential Office.

The presidential office’s advisory to the FSC urged the regulatory body to revisit its stance on crypto and crypto offerings such as ETFs based on Bitcoin or other cryptocurrencies.

Notably, through its previous announcement regarding potential violations of the Capital Markets Act, the FSC acknowledged that crypto regulation is an evolving space. As such, policies should be continuously reviewed as markets develop globally.

Beyond trading risks, South Korea is also looking at potential benefits around innovation from new crypto instruments, according to Sung.

However, contrasting regulatory moves are also underway in the Korean crypto space. The FIU is planning stricter rules around crypto mixing services like Tornado Cash, citing anti-money laundering efforts. Mixing services shuffle investors’ funds across various blockchains to maintain privacy and obscure transactions. The FIU aims to counter potential illegal money laundering enabled by mixer anonymity. This initiative follows similar sanctions implemented by the US against Tornado Cash and adjacent crypto-mixing services.

The FIU also follows Financial Action Task Force guidance to limit digital asset threats. However, the final decision and details around Korea’s mixer rules remain pending. Critics argue that such strict policies could limit financial freedom and technological innovation.