Korean SEC Takes Formal Steps Toward Bitcoin ETF Approval

The Korean regulator is forming a virtual asset committee to explore Bitcoin ETF approval and corporate crypto accounts, likely reducing the Kimchi premium.

The Financial Services Commission (FSC) in South Korea has initiated the formation of a virtual asset committee. This committee aims to address critical issues surrounding the approval of spot exchange-traded funds (ETFs) and the opening of corporate accounts for crypto exchanges.

According to Ki Young Ju, founder of CryptoQuant, this development is bullish as it is expected to reduce the Kimchi premium, a phenomenon in which cryptocurrencies trade at higher prices in South Korea compared to other markets. As arbitrage funds and market makers enter the Korean market, price discrepancies may be minimized, creating more balanced trading opportunities.

The Korean SEC (금융위원회) has formed a virtual asset committee to discuss the approval of #Bitcoin spot ETFs and the allowance of corporate accounts for crypto exchanges.

This is bullish and will mitigate the Kimchi premium as arb funds and MMs enter the Korean market. pic.twitter.com/Mjq2xX5AVg

— Ki Young Ju (@ki_young_ju) October 10, 2024

Notably, this move signals a significant step toward regulating and expanding the crypto industry in the country. The FSC’s decision aims to establish a more structured and transparent framework for managing virtual assets, as detailed in its recent report presented during the National Assembly’s State Affairs Committee’s audit on October 10.

Virtual Asset Committee’s Role in Regulations

The virtual asset committee will play a pivotal role in shaping policies for South Korea’s virtual asset market. Comprising government officials from key ministries such as the Financial Services Commission, the Ministry of Justice, the Ministry of Strategy and Finance, and the Ministry of Science and ICT, as well as nine civilians, the committee will advise on critical regulatory issues. 

One of the primary focuses of the committee will be evaluating the potential approval of Bitcoin spot ETFs, which are currently restricted under the Capital Market Act. This committee will also explore the possibility of allowing corporate accounts for crypto exchanges, which are currently prohibited due to concerns about money laundering.

Strengthening Market Oversight 

In addition to the formation of the virtual asset committee, the FSC has emphasized the importance of market oversight. The regulator highlighted ongoing efforts to combat market manipulation and unfair trading practices. 

Furthermore, the FSC has established a non-profit foundation, the Digital Asset User Protection Foundation, to safeguard user assets from businesses that have closed or suspended operations.

Crypto ETF Developments in the U.S. Market

While South Korea moves forward with its regulatory efforts, the U.S. market has also seen notable developments. Canary Capitals, a leading investment management firm, filed an S-1 form with the U.S. SEC on October 8, announcing its intention to launch an XRP ETF. 

The filing positions Canary to offer investors exposure to XRP, one of the largest cryptocurrencies by market capitalization. With investor demand driving this move, the proposed Canary XRP ETF will benchmark its value against the CME CF Ripple-Dollar Reference Rate. The filing, however, leaves out key details, such as the fund’s ticker and exchange listings.