South Korea’s financial watchdog has announced a policy roadmap to legalize spot cryptocurrency ETFs by late next year, in what may be the country’s boldest pro-crypto shift yet.
The move, unveiled Thursday by the Financial Services Commission (FSC), would reverse long-standing restrictions on crypto-linked exchange-traded funds, signaling a deeper commitment by the Lee Jae-myung administration to fold digital assets into South Korea’s formal financial architecture.
A Long-Awaited Break from the Past
It wasn’t long ago that crypto assets were treated like ticking time bombs in South Korea’s financial ecosystem. The FSC had consistently raised alarms over volatility, fraud risk, and investor exposure.
But that’s changing.
The policy blueprint, submitted to the Presidential Committee on Policy Planning, outlines a framework to greenlight spot crypto ETFs—a type of fund that holds actual digital currencies, not just futures contracts. For years, these products were considered off-limits due to concerns about price manipulation and unclear asset backing.
Now, they’re front and center.
What’s in the Roadmap?
The new crypto ETF plan isn’t a free-for-all. It comes with layers of regulatory guardrails to calm nerves in parliament and the broader public.
According to the FSC filing, the proposal includes:
Mandatory custodial services to prevent fund mismanagement
ETF valuation rules that match traditional asset standards
Enhanced disclosure protocols for issuers
Ongoing liquidity monitoring by designated institutions
The government also hinted at new rules to oversee how spot ETFs are marketed, particularly to retail investors. That’s where things tend to get messy—and where public trust can erode fast.
One official familiar with the draft told state media, “These ETFs must be operated under the same transparency expectations as traditional financial products. We cannot afford reputational damage.”
Stablecoins Could Make a Comeback
Here’s a twist many didn’t see coming.
The FSC is also planning to lift its years-long ban on Korean won-denominated stablecoins. That policy had effectively sidelined local fintech firms and pushed liquidity into offshore markets like Singapore and Hong Kong.
And it hurt.
South Korean crypto startups have repeatedly cited the won ban as a major hurdle to scaling domestically. The restriction not only limited product offerings but also drove capital abroad—a sore point for a government trying to keep tech innovation at home.
If the ban is officially lifted in 2025 as planned, local companies would finally be able to issue stablecoins tied to the Korean won, adding a much-needed boost to South Korea’s digital asset ecosystem.
Parliament Still Holds the Keys
Not everything in the FSC’s announcement is set in stone. Most of the roadmap is still in early-phase planning and will need legislative buy-in.
And that’s not guaranteed.
The National Assembly has historically been a mixed bag when it comes to crypto. Some lawmakers are wary of loosening guardrails too quickly, fearing speculative bubbles and systemic risk. Others argue that South Korea is already falling behind global peers like the U.S., where the Securities and Exchange Commission approved multiple spot Bitcoin ETFs earlier this year.
There’s also a timing issue. General elections are slated for April 2026. That gives the Lee administration a relatively short window to push reforms through before political winds shift.
Banks and Big Money Might Finally Join the Party
Beyond ETFs and stablecoins, the FSC is also cracking open the door for institutional crypto trading. Right now, banks and asset managers are essentially locked out of the space, limited to offering custody or research services at best.
That could change soon.
The roadmap hints at phased regulatory approvals that would allow institutional investors to directly trade crypto assets. It’s a big step—and one that could finally give legitimacy to a market that’s often dismissed as too volatile for serious capital.
What’s more, it could pave the way for financial products that South Koreans have long had to access overseas—like crypto retirement portfolios, tokenized bond funds, or Ethereum-based structured notes.
This is something the FSC appears eager to enable, if cautiously.
A Crypto-Forward Presidency in Action
President Lee Jae-myung isn’t just tolerating crypto—he’s betting on it.
In June, his government introduced the Digital Asset Basic Act, a proposed law that would create a legal foundation for blockchain-based finance, including allowing companies to issue their own stablecoins.
That proposal isn’t just about deregulation. It’s about modernization.
President Lee campaigned on a vision to make South Korea a hub for responsible crypto innovation. His administration’s latest roadmap follows through on that promise—placing digital assets within a clear legal framework while signaling a break from the no-go policies of the past.
As one FSC official reportedly put it, “We’re not rushing in blind. But we’re also not sitting back anymore.”
