New South Korean leadership will press for BTC ETF trading

The Democratic Party of Korea promised to allow Bitcoin exchange-traded funds and it expects to follow through, one way or another.

The Democratic Party of Korea will request that the Financial Services Commission (FSC) reconsider its interpretation of the legal status of spot Bitcoin (BTC) exchange-traded funds (ETFs), according to a local press report. Allowing spot ETFs with underlying virtual assets was one of the partys campaign promises.

An unnamed official of the Democratic Party policy committee told The Korea Economic Daily that the party would make the request after the opening of the National Assembly in June. The opposition party was swept into power in the April elections in South Korea and holds 175 of 300 seats in the legislative body.

The FSC issued a statement on Jan. 12 saying domestic securities firms could violate the Capital Markets Act by listing foreign spot BTC ETFs. The United States Securities and Exchange Commission approved spot BTC ETF trading on Jan. 10. The South Korean financial regulators position was not well received. The previous presidential administration urged the FSC to reconsider its decision on Jan. 18.

Related: Head of South Koreas financial regulator to discuss crypto with Gary Gensler: Report

Virtual assets are not included in the Capital Markets Acts definition of an underlying asset according to the prevailing interpretation. The official told the newspaper:

If the authority's response to the authoritative interpretation is insufficient, we are considering revising the Capital Markets Act.

The process to amend that act requires many steps and would take months at best, the newspaper noted. In addition, the official stated that discussions will begin in the second half of the year on the second stage of the 2020 Virtual Asset Business Rights Act.

Hong Kong began trading in spot BTC and Ether (ETH) exchange-traded funds on April 30, raising hopes for the creation of an analogous market in South Korea, despite the Hong Kong ETFs modest performance.

Since the passage of the 2020 act, South Korean regulators have been tightening their grip on the crypto market. In 2024, tougher sentences for crypto-related crimes have been instituted, and new guidelines for cryptocurrency exchanges have been issued.