South Korea is reportedly preparing to relax its restrictions on crypto trading for institutional investors, signaling a significant shift in the country’s approach to digital asset regulation.
Local media outlet Yonhap reported on Jan. 8 that the country’s Financial Services Commission (FSC) will introduce phased regulatory changes to enable institutions to participate in crypto trading.
Currently, South Korea’s regulations limit crypto trading to verified retail investors. Banks are prohibited from opening accounts for institutional investors, even though they aren’t outright banned. The exclusion of institutional investors from the digital assets market has been a long-standing problem.
The FSC will work with the Digital Asset Committee in order to implement these reforms. Non-profits are likely to get access first. This move marks a shift in the government’s approach to institutional involvement in crypto markets.
In addition, FSC prepares to launch the second stage of the Virtual Asset User Protection Act. In this phase, new guidelines will be established on crypto listings standards, stablecoins and the operational conduct of virtual asset exchanges.
Kwon Dae Young, director of FSC said: “The updated framework aligns South Korea to global regulations on digital assets.” He stated:
“We need to discuss how to create listing standards, what to do with stablecoins, and how to create rules of conduct for virtual asset exchanges. We will work to align with global regulations in the virtual asset market.”
In addition, as part of its efforts, the FSC plans to amend the Special Financial Transactions Act. These changes include an evaluation system that will assess whether crypto exchange shareholders are eligible, and incorporate social credit ratings as part of this process.
Advancing crypto
The FSC’s actions align with broader efforts to develop South Korea’s crypto industry further.
One of the main initiatives is to introduce spot-based exchange-traded crypto funds. These funds are gaining popularity in other countries but have not yet been approved by the South Korean regulatory authorities.
Eun-Bo Jeong, Chairman of South Korea’s Exchange, recently advocated for the introduction of crypto ETFs. He argued that these innovative products could address the nation’s need for dynamic financial instruments to boost its capital markets.
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Oluwapelumi Adejumo
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