South Korea’s People Power Party has paused its plans to relax rules on cryptocurrencies, notably postponing the idea of allowing local spot Bitcoin exchange-traded funds (ETFs). This shift away from earlier election promises has sparked discussions and reflects the complexities of aligning party proposals with the government’s and financial authorities’ stances on digital assets.
The party, under the leadership of Representative Yoon Chang-hyun, had initially planned to unveil a virtual asset pledge. However, this announcement has been put on hold indefinitely. This decision comes amidst the backdrop of South Korea’s financial regulator reaffirming its ban on the introduction of cryptocurrency ETFs by financial institutions, citing non-compliance with the Capital Markets Act’s requirements for underlying assets.
Challenges in Cryptocurrency Policy Alignment
The delay signals a broader hesitation within the ruling party regarding cryptocurrency policies. Earlier, there were intentions to propose reforms that would delay the taxation of crypto profits and allow domestic institutions to invest directly in cryptocurrencies and introduce spot Bitcoin ETFs. Yet, these plans have been retracted from the party’s policy priorities due to challenges in achieving consensus with regulatory bodies and concerns over the potential risks involved in corporate investments in virtual assets.
Opposition and Regulatory Perspectives
In contrast, the Democratic Party, South Korea’s opposition, has moved forward with its cryptocurrency-related campaign promises. This development comes as the country gears up for its general election on April 10. Meanwhile, the Financial Services Commission (FSC) of South Korea remains wary, especially after the United States Securities and Exchange Commission (SEC) approved a spot Bitcoin ETF. The FSC’s caution stems from perceived investment risks linked to virtual assets.
Looking Ahead: Seeking Guidance from the SEC
The Financial Supervisory Service (FSS), South Korea’s main financial regulator, plans to consult with the SEC for insights on regulating spot Bitcoin ETFs. FSS chief Lee Bok-Hyun has outlined a business plan for 2024 that includes discussions on the South Korean financial market, with a particular focus on spot Bitcoin ETFs, during visits to major financial hubs like New York in the second quarter.
This move represents a cautious approach to understanding and potentially adopting practices that align with international standards, balancing innovation with investor protection in the rapidly evolving cryptocurrency market.
