South Korea FSS advises fund managers to limit ETF exposure to encryption companies such as coinbase, citing caution as regulatory rules are still evolving. South Korea Financial Supervision Service (FSS) has advised local asset managers to avoid excessive exposure to encryption firms.
According to a Wednesday report of Korea Herald, FSS verbally instructed local active managers to limit exposure to encryption companies. The report cited the currency stock and strategy as examples.
The orientation was informal and consultative. The impact has also been limited because passive funds traded on the scholarship (ETFs) that operate in South Korea cannot easily remove specific stocks without changes approved by index providers.
“As we track the index directly, removing an action without a change in the index can result in large tracking errors. We understand the regulatory posture, but we cannot respond immediately,” an anonymous fund manager told Korea Herald.
The FSS recognized these limitations and clarified that its observations are intended only to encourage caution in ETF design until new rules are introduced. Still, some sector participants also raised concerns about the courts of such expectations.
Korea Herald cited sources of the sector, noting that investors are already gaining exposure to encryption companies through trading funds on the US listed in the US. Consequently, expecting such limitations only in household products can be unfair to local asset managers. An anonymous source of the industry said:
“Restricting domestic ETFs will not interrupt capital flows. Investors are already bypassing these rules through US products. It is questionable if this regulation is effective.”
Cryptography stocks are popular among Korean active managers
Observations follow an increase in South-Korean ETF allocation for encryption-related actions. Korea Investment Management’s ACE Bestseller ETF holds coinbase by 14.6%; The active ETF of growth of Nasdaq Koact holds coinbase (7.4%) and strategy (6%), totaling 13.4%.
Similarly, the ETF Koact Global Ai & Robotics Active allocates 10.3% to coinbase, and the active ETF of the Nasdaq 100 timefolio provides an 11% exhibition to encryption -related actions.
The FSS also pointed out that local financial institutions cannot maintain, acquire, invest or leverage as a guarantee of any cryptocurrency. “Although American and Korean regulators are showing signs of relieving the rules of encryption, no concrete laws or guidelines have been implemented,” said one employee, adding:
“Until new structures are in force, the existing rules must be followed.”
The observations are increasing regulatory opening shown by South Korean regulators. Earlier this month, the South Korean Ministry of Souths and startups proposed survey restrictions that excluded encryption companies to access various tax incentives and financial support initiatives.
In addition, the actions of the main South Korean banks emerged this month after the records of stable trade brands, signaling the growing institutional interest in digital assets. This development also followed the central bank of South Korea postponing the test of a central bank digital currency amid increasing support to StableCoins.
Banco da Korea vice -governor Ryoo Sangdai said in June that he wanted banks to be the main stable issuers in the country, with gradual expansion in other sectors. Last month’s reports also indicate that eight central South -Korean banks should come together to launch a Stablecoin attributed to the country’s WO