South Korea urges asset managers to limit cryptocurrencies

South Korea’s Financial Regulatory Services (FSS) advises local asset managers to avoid excessive exposure to cryptocurrency companies.

According to Wednesday Report South Korean pioneers reported that FSS verbally directed local asset managers to limit exposure to cryptocurrency companies. The report uses Coinbase and strategic stocks as examples.

The guide is reportedly informal and consultative. The impact is also limited because passive Trading Trade Funds (ETFs) Operating in South Korea cannot Easily remove specific stocks without the need for changes approved by the index provider.

“Because we track indexes directly, removing stocks without index changes can lead to a large tracking error. We understand the regulatory stance but cannot respond immediately.”

FSS recognizes these limitations and clarifies that its comments are intended to encourage caution in ETF design until new rules are introduced. Nevertheless, some industry players expressed concern about the fairness of this expectation.

The Korea Herald quoted industry sources, pointing out that investors have gained exposure to cryptocurrency companies through U.S.-listed exchange-traded funds (ETFs). Therefore, it is only expected that such restrictions may be unfair to the local asset manager for household products. An anonymous industry source said:

“Restricting domestic ETFs will not block capital flows. Investors have addressed these rules through U.S. products. It is questionable whether the regulations are effective.”

Related: Young Koreans who turned to cryptocurrency out of despair

Crypto stocks are popular among Korean asset managers

These words are added as South Korean ETFs allocated to crypto-related stocks. Korean Investment Management Company’s Ace US Stock Bestseller ETF hold Total composition 14.6%; KOACT NASDAQ growth-active ETF hold Coinbase (7.4%) and strategy (6%), totaling 13.4%.

Similarly, KOACT Global AI and Robot Active ETF distribute 10.3% of Coinbase and TimeFolio Nasdaq 100 Active ETF supply 11% exposure to crypto-related stocks.

Related: 27% of Koreans aged 20-50 hold cryptocurrency, 70% have more investments: Report

FSS also noted that local financial institutions cannot hold, acquire, invest or leverage as any cryptocurrency. “While both the U.S. and South Korean regulators show signs of relaxing encryption rules, no specific laws or guidelines have been implemented,” an official said.

“The existing rules must be followed before the new framework is in place.”

Speech follows South Korean regulators show more and more regulatory openness. Earlier this month, South Korea’s Small and Medium Enterprises and Startups Department proposed Increase restrictions and exclude cryptocurrency companies By obtaining various tax relief and financial support programs.

In addition, the major shares South Korean banks soar after applying for Stablecoins for trademark documentsmarking the growth of institutional interest in digital assets. This development also follows the Korean Central Bank Delay tests of central bank digital currency In increasing support for stabilizers.

Ryoo Sangdai, deputy governor of the Bank of Korea, said in June that his goal Banks are the main issuer of Stablecoins In the country, it gradually expands to other sectors. Last month’s report also indicated that eight central banks in South Korea were It is expected to cooperate to launch a stable By 2026, hanging on the currency the country has won.