South Korea's Financial Watchdog Clamps Down on Crypto Stocks in ETFs!

Hold onto your hats, folks! South Korea's Financial Supervisory Service has just dropped a bombshell, telling local asset managers to cool it with crypto-linked stocks like Coinbase and Strategy in their ETFs. They're pulling out the big guns, citing a 2017 policy that's basically a no-go for institutional investments in virtual assets.

Word on the street from the Korean Herald is that the FSS didn't just send a memo; they went full-on verbal with this guidance to several firms earlier this month. They're gunning for holdings in companies like Coinbase and Strategy, you know, the ones that ETFs love to track in the crypto scene.

It's not an official crackdown, but it's a loud and clear warning that asset managers better keep playing by the Financial Services Commission's old-school rules from 2017.

Why has the FSS issued this instruction now?

The FSS is laying it down straight: until new laws hit the books, regulated financial institutions gotta stick to the old playbook. That 2017 notice? It's a big fat no to holding, buying, or investing in virtual assets or companies deep in the crypto game.

What set them off? A surge in local ETFs stuffing their portfolios with crypto-heavy firms. Take Korea Investment Management’s ‘ACE U.S. Bestseller ETF’—it’s sitting on over 14% in Coinbase shares! Other funds are jumping on the same bandwagon.

Yeah, passive ETFs can't just yank stocks out unless the index shifts, but the FSS is calling on firms to think twice before cooking up new ETF recipes.

The FSS's game plan? Keep a lid on overexposure until they roll out the red carpet for a regulatory reboot.

But here's the kicker—the timing's wild because South Korea's already started easing up on institutional crypto access. They've agreed to phase out the country’s de facto ban on institutional crypto trading.

Just last month, they let nonprofits cash in on donated crypto. Public companies and pro investors? They're on deck for the second half of 2025.

What is South Korea's stance on crypto ETFs?

South Korea? They've been playing it cool with crypto ETFs. Retail investors can dip their toes in foreign crypto-linked ETFs, but local firms? Nope, they've been locked out of offering their own.

But hold up—since the U.S. and other big markets started rolling out the crypto-friendly carpet, South Korea's been doing some serious soul-searching. Last month, the Financial Services Commission threw down a digital asset roadmap, promising to legalize spot crypto ETFs by the end of the year.

And get this—both the People Power Party and the ruling Democratic Party are all in on legalizing crypto ETFs. They're backing bills to let spot ETF trading fly and are tearing down old rules like the "One Exchange, One Bank" deal that cramped partnerships between exchanges and financial bigwigs.

The push is on turbo since President Lee Jae-myung took the helm. He was all about crypto reform during his campaign, promising to greenlight spot Bitcoin ETFs and bring more institutions into the fold.

His crew's been working overtime to make crypto assets legit, clearing up the rules and slashing trading costs to reel in the young guns.