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The price of bitcoin is on the rise, as illustrated in these real-time electronic charts for bitcoin and other digital currencies traded in Korea, at Bithumb's customer center in Seoul, Thursday. Korea Times photo by Shim Hyun-chul Financial authorities deem trading a potential violation of Capital Market Act By Lee Yeon-woo Despite the considerable anticipation among retail investors, it is unlikely that bitcoin exchange-traded funds (ETFs) will be available for purchase or brokerage in Korea for the foreseeable future. Financial authorities have determined that such actions conflict with the current Capital Market Act. According to financial authorities, Friday, an ETF must track a base index or price composed of underlying assets, which may include financial investment products, currencies, or commodities. However, the Financial Services Commission (FSC) interprets that virtual assets, such as bitcoin, do not meet the criteria to be considered as underlying assets, since their value or price cannot be reasonably evaluated. According to the interpretation, brokerage firms in Korea are unable to list bitcoin ETFs, nor can they allow their trade in the market. Furthermore, the FSC has determined that domestic investors are prohibited from trading even the 11 ETFs that have been approved for listing by the U.S. Securities and Exchange Commission (SEC). "The intermediation by domestic securities firms in Korea for bitcoin ETFs listed abroad could potentially conflict with the government's current stance on virtual assets and the provisions of the Capital Market Acts," FSC said. This development has put the brakes on brokerage firms that were actively preparing to capitalize on this new source of income. After the SEC approval, the industry was instructed by financial authorities to halt their sales plans, and this led to some confusion. For instance, Kiwoom Securities posted a sales notice on their website at 4 p.m., Thursday, only to remove it 30 minutes later. For the listing and trading of bitcoin ETFs to become feasible in Korea, an amendment to the Capital Markets Act would be required, or a formal interpretation from the FSC must be issued. However, the FSC is currently taking a cautious stance to integrating virtual asset investments into the established financial framework. The Assembly also appears to be preoccupied with other issues due to the general election in April. The situation reduces the likelihood of virtual assets being formally incorporated into the system. Nevertheless, industry observers from both securities and virtual assets sectors are welcoming the development and its potential impact on the domestic market. "Bitcoin ETFs are a new type of product, and their introduction is positive for the industry as it broadens the variety of sales options. Although financial authorities do not yet recognize them as legitimate products, I believe they could create significant ripples in the future. We'll wait and see," a local brokerage firm official said. Financial authorities have announced plans for further reviews of these products. "In light of the upcoming implementation of the Virtual Asset User Protection Act in July, which reflects the evolving regulation of virtual assets, and considering international precedents like those in the U.S., we are preparing for additional evaluations," FSC said. Meanwhile, the total transaction volume of 11 Bitcoin ETFs on the New York stock market reached 6 trillion won ($4.5 billion) on their first day, showcasing the keen interest of international investors.
Read more: koreatimes
