The Financial Supervisory Service of South Korea (FSS) has reached out to local asset management companies with a recommendation to reduce their holdings of cryptocurrency firms’ stocks, specifically Coinbase and Strategy (formerly MicroStrategy), in their exchange-traded funds. This initiative is linked to the 2017 regulations that prohibit institutional financial institutions from holding crypto assets or products derived from them.
This is reported by Business • Media
FSS Recommendations and Their Impact on Companies
The relevant recommendations were sent to companies in early July 2025. The FSS urged not to increase the shares of cryptocurrency companies in exchange-traded funds (ETFs), although these recommendations are not mandatory. It is clarified that the existing restrictions apply only to institutional players, not retail investors, which has caused dissatisfaction among ETF providers.
“Recently, there has been a trend towards deregulation of virtual assets in the U.S. and Korea, but no specific laws or guidelines have been established yet. This means that existing guidelines should be followed until a new system is operational,” quotes The Korea Herald a statement from the regulator’s representative.
Current ETF Market Situation and Expectations for Change
In South Korea, many ETFs have a significant share of stocks from American cryptocurrency companies. For example, the ACE US Equity Best Seller ETF, managed by Korea Investment Trust Management, has 14.6% of its portfolio in Coinbase stocks. Other products include the KoACT US Nasdaq Growth Company Active ETF, KoACT Global AI & Robot Active ETF, TIMFOLIO US Nasdaq 100 Active ETF, and others.
The FSS acknowledges that implementing changes, especially for passive ETFs, can be a complex process. Therefore, the primary goal of the recommendation is to promote caution when launching new financial products until legislative issues are resolved.
Investors are hopeful that regulatory updates will occur in the near future, especially following the victory of pro-cryptocurrency candidate Lee Jae-moon in the presidential elections, who promised crypto reforms. This strengthens expectations for future changes in the regulation of South Korea’s cryptocurrency market.