South Korea’s main financial regulator is reconsidering the ban on local spot cryptocurrency exchange-traded funds (ETFs) and institutional trading on crypto exchanges. As reported by News1, the Financial Services Commission (FSC) shared during an annual audit that its newly established cryptocurrency committee will review the ban and assess potential changes to digital asset policies.
This marks a change in the regulator’s stance, moving away from its resistance to digital assets being part of traditional financial markets. After approving spot Bitcoin ETFs in the U.S. back in January, the regulator has stood by its decision to keep the ban on local crypto ETFs, pointing to concerns about the potential risks these could pose to market stability.
Lawmakers in the country have been pushing for change. Both the ruling Democratic Party and the opposition had promised to approve local spot Bitcoin ETFs during their election campaigns earlier this year. In May, the winning left-wing party stated that it would ask the Financial Supervisory Commission (FSC) to reconsider the ban.
Upbit’s dominance in South Korea’s crypto market
Since 2018, South Korean institutions haven’t set up cryptocurrency trading accounts on exchanges due to strict regulations from the Financial Services Commission (FSC). FSC chair Kim Byung-hwan also mentioned plans to investigate Upbit’s dominance and the overall monopolistic control of South Korea’s digital asset exchanges, alongside his review of ETFs and institutional crypto accounts.
Among South Korea’s five licensed crypto exchanges, Upbit dominated with over 61% of the trade volume in the last 24 hours, processing more than $1.17 billion, according to CoinMarketCap. In March, its market share averaged an impressive 80%.
During an audit, Kim responded to Democratic Party lawmaker Lee Kang-il’s concerns about Upbit’s financial ties with its partner, K-bank. South Korean regulations mandate that cryptocurrency exchanges must store user deposits with partner banks.
Lee raised concerns about Upbit’s strong influence over K-bank, pointing out that 20% of the bank’s total deposits come from Upbit. He cautioned that if the partnership between Upbit and K-bank were to break down, it could trigger a bank run.
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