South Korea’s Financial Supervisory Service Limits Coinbase Exposure in ETFs Amid Regulatory Crackdown

On July 23, the Financial Supervisory Service (FSS) of South Korea mandated local asset management firms to recalibrate their exchange-traded funds (ETFs) to reduce holdings in crypto-related entities such as Coinbase and Strategy, as reported by the Korea Herald. This move aligns with the Financial Services Commission’s (FSC) 2017 administrative guidelines, which restrict regulated financial institutions from engaging in virtual asset equity investments.

The directive has prompted concerns among domestic financial stakeholders who highlight a potential disparity, noting that retail investors retain the ability to invest in US-listed ETFs with crypto exposure. An FSS spokesperson emphasized that regardless of evolving regulatory landscapes in the US and South Korea, institutional investors must comply with current mandates until formal updates are enacted.

As the supervisory authority for South Korea’s financial sector, the FSS enforces regulatory compliance and operational oversight, functioning under the aegis of the FSC, the nation’s principal financial regulatory body. This regulatory stance underscores South Korea’s cautious approach toward institutional crypto investment risk management.