KOFIA Chief Backs Regulated Crypto Products
The South Korean Financial Investment Association – KOFIA – will be pushing in 2025 for the approval of cryptocurrency exchange-traded funds (ETF), according to an emerging demand from more aged investors. KOFIA head Seo Yoo-seok further explained that the risk of a direct crypto investment may be balanced by regulated ETFs.
Demand Push from Aging Investors
Seo’s comments certainly underline the tectonic shift in crypto demographics. By local reports, the number of new crypto exchange registrations has surged 450% this year, with nearly half coming from those 40 years and older. For many older investors, there is interest in tapping into the world of digital assets. A good number prefer exposure through regulated means and not actual ownership of cryptocurrencies.
Regulatory Challenges Remain
Regardless of this demand, the Financial Services Commission of South Korea does not consider cryptocurrencies an underlying asset according to the Capital Markets Act. This has kept crypto-backed ETFs from getting approved, hence making it hard for financial institutions to launch these products. Bitcoin and Ethereum ETFs are unlikely to launch if there are no changes in legislation.
Government to Rethink Crypto Policies
In October 2024, South Korea launched a Virtual Asset Committee that would re-discuss corporate crypto trading and ETFs. As of recent discussions, reviews on corporate trading accounts are almost done, which might open up avenues for future ETF approvals. This may increase institutional participation manifold if the regulators change their minds.
South Korea Crypto Market and Regulation
South Korea is one of the world’s most active crypto markets, with the local currency even briefly eclipsing the US dollar as the most traded fiat against crypto in early 2024. Strict AML laws that force exchanges to partner with local banks for crypto-to-fiat services curtail institutional participation.
Investors were required to open a real-name account with a local bank to open a crypto-to-fiat account. This, in effect, shut the door on corporate entities from trading cryptocurrencies. Currently, only five exchanges in South Korea meet the banking requirements necessary to provide fiat on-ramps, restricting market access for corporations.
If KOFIA succeeds in the introduction of Bitcoin and Ethereum ETFs, then it will give older investors a regulated alternative to direct crypto exposure, further legitimizing the industry within South Korea’s financial ecosystem.
