Financial Services Commission, which maintains its stance of not allowing domestic investment in ‘Bitcoin spot ETF’, criticizes the industry for “anachronistic judgment”

Domestic trading of spot ETFs and issuance by management companies may violate the Capital Markets Act
Trading of existing overseas listed Bitcoin futures ETFs is possible
It was also pointed out that “growth momentum is being taken away from the rapid growth of virtual assets”

Financial authorities have banned both investment in Bitcoin spot ETFs and issuance by domestic asset management companies. Trading of exchange-traded funds (ETFs) using Bitcoin spot as the underlying asset began in the United States, but the authorities maintained the position that domestic trading of Bitcoin spot ETFs may violate the Capital Markets Act. While the newly introduced virtual asset product market is expected to grow rapidly, some are raising criticism that it may limit investment opportunities for domestic consumers and lead to loss of leadership in the related product market.

“At first they said it was against the law,” but the financial authorities changed their stance

While the U.S. Securities and Exchange Commission (SEC) approved the listing application for the Bitcoin spot ETF submitted by 11 management companies, including Ark Invest, Blackrock, and Fidelity, on the afternoon of the 11th, Korea’s financial authorities approved the Capital Markets Act for domestic trading of the spot ETF. It was determined that there was a possibility of violation. Since virtual assets are not recognized as financial investment products stipulated in the Capital Markets Act, there is a need to consider legal compliance. Accordingly, some securities companies that were trying to provide new Bitcoin spot ETF purchase services in overseas markets, such as Mirae Asset Securities, suspended the service.

However, the authorities reversed their previous position over the weekend. On the afternoon of the 14th, the Financial Services Commission announced, “Although trading of Bitcoin futures ETFs that are already listed overseas is possible, both the issuance of spot ETFs by domestic managers and the brokerage of overseas products may be illegal.” In addition, out of concern that the authorities’ position would be interpreted broadly, additional reporting materials were released. The authorities said, “We have consistently revealed that the issuance of Bitcoin spot ETFs or the brokerage of overseas Bitcoin spot ETFs may violate the existing government position and the Capital Markets Act, and that we will closely review them in the future.”

There are criticisms and voices over the authorities’ reversal of position and stubborn regulations. Judging by the fact that the authorities changed their position in the past few days, it means that they hastily decided on a domestic investment policy only after the U.S. SEC approved the listing application for the Bitcoin spot ETF. An official from a domestic securities company said, “At short, it has been 8 months since the U.S. SEC received applications for listing Bitcoin spot ETFs from overseas management companies such as Ark Investment, and at length, it has been about 2021 years since 2 when the lawsuit between the SEC and Grayscale began. He pointed out, “However, the authorities did not conduct a separate review or investigation of the system, but instead changed their position, causing confusion.”

In addition, with the introduction of new virtual asset products around the world, there are concerns that investment opportunities for domestic consumers are being blocked and even the leadership of the virtual asset market has been lost. Another financial investment industry official said, “Through this incident, we have been able to confirm that the government still considers virtual assets to be speculative assets,” adding, “In particular, demand for investment in virtual asset products from individuals as well as institutional investors around the world is increasing. “Due to this ban on spot ETF trading, all funds that could have flowed into the domestic market have now flowed overseas,” he expressed regret.

New market leadership lost to old regulations

Considering the trading volume of the US Bitcoin spot ETF on the first day of trading, it appears that the concerns of the domestic financial investment industry will not simply be unfounded. According to the New York Stock Exchange, the daily trading volume of Bitcoin spot ETF products launched by a total of 11 asset management companies on the 11th (local time) reached a total of $46 billion (about 6 trillion won). Among these, the trading volume of ‘Grayscale Bitcoin Trust (ticker GBTC)’ operated by Grayscale Investment is 5,489, which amounts to half of the total ETF trading volume if today’s closing price is applied. This is more than the trading volume of the world’s largest gold spot ETF.

There are even predictions that more new investments will flow in the future. British financial institution Standard Chartered (SC) predicted in a report on the 8th that “up to $1,000 billion (about 132 trillion won) will flow into Bitcoin spot ETFs this year alone.”

With such rapid growth expected, there are concerns that the number of domestic management companies turning to overseas markets will increase. Some domestic management companies have advanced into countries where Bitcoin ETF issuance and brokerage are permitted. Mirae Asset Global Investments also applied for the listing of a Bitcoin spot ETF with the US SEC through its US subsidiary ‘Global ‘Active’ was listed. This product, which was listed at $8 million, is now worth $1 million, with its net assets more than quadrupling.

There is also criticism from the political world that the financial authorities’ judgment is going against the trend of the times. Attorney Joo Hyeon-cheol, who was an advisory member of the Financial Services Commission’s digital asset joint public-private task force, said, “Korea has led the virtual asset market, accounting for 40% of Bitcoin trading volume, and the government’s long-standing regulations have not provided opportunities for financial growth on its own. “I missed it,” he said. “It is an incomprehensible decision for Korea to block a product approved by the United States, which is the most stringent in the world in protecting investors and preventing financial crimes. “It doesn’t fit the tone,” he pointed out.