South Korea’s financial regulator has advised domestic asset managers to scale back their investments in crypto-related companies, including major U.S. firms like Coinbase and Strategy. The directive, delivered verbally earlier this month by the Financial Supervisory Service (FSS), reflects the country’s ongoing cautious stance toward digital assets, despite growing global momentum.
According to a report from The Korea Herald, the FSS reminded fund managers to adhere to existing rules issued by the Financial Services Commission (FSC) in 2017. These guidelines restrict regulated financial institutions from directly investing in or holding virtual assets, including equity stakes in companies that derive significant value from cryptocurrencies.
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The move has sparked frustration among local financial players, who argue that the policy puts them at a disadvantage. While domestic institutions face limitations, retail investors in South Korea can still buy U.S.-based ETFs that include crypto-exposed firms, creating what some see as an uneven playing field.
An unnamed official from the FSS emphasized that institutions must continue following the current rules until new regulatory frameworks are formally introduced. Although both the U.S. and South Korea are reassessing their crypto regulations, the official stressed that changes abroad don’t automatically shift South Korea’s regulatory obligations.
The FSS, which operates under the FSC, is responsible for the direct supervision of the country’s financial entities, ensuring compliance and stability in daily operations.
This guidance comes amid a shifting regulatory landscape in South Korea. Earlier this year, the country began to ease its longstanding restrictions on institutional crypto trading. The election of President Lee Jae Myung, who campaigned on a pro-crypto platform, has accelerated efforts to modernize financial laws. His administration is now exploring the approval of spot cryptocurrency ETFs and is backing initiatives like won-based stablecoins to strengthen the local digital asset ecosystem.
Despite regulatory hurdles, South Korea remains a major hub for crypto activity. As of late 2024, the nation had over 18 million registered crypto investors, with retail traders known for embracing altcoins and high-risk strategies.
