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South Korea's Financial Services Commission (FSC) has finally wrapped up new regulations allowing listed companies & professional...
Quick overview
- South Korea's Financial Services Commission has lifted a nine-year ban on corporate cryptocurrency investments, allowing listed companies and professional investors to allocate up to 5% of their equity capital to crypto holdings.
- Investments are limited to the top 20 cryptocurrencies on major exchanges, and the new regulations will impact nearly 3,500 companies and registered investment corporations.
- The move is seen as a significant step towards integrating corporate crypto investment in South Korea, potentially reversing capital flight and enhancing the local crypto market.
- Industry experts express concerns over the restrictive 5% equity limit, fearing it may hinder the growth of companies looking to leverage digital assets.
South Korea’s Financial Services Commission (FSC) has finally wrapped up new regulations allowing listed companies & professional investors to get in on the cryptocurrency action, ending a nine-year ban in the process. Under these new rules, eligible outfits will be able to allocate up to 5% of their equity capital to crypto holdings each year, of course. There’s a catch: investments are restricted to the top 20 cryptocurrencies on major exchanges in the country.
The new regulation will affect just under 3,500 companies & registered investment corporations. The exchanges must also start implementing these changes in stages to prevent market volatility from getting out of hand and limit the size of buy/sell orders to keep things stable.
Market Implications
It’s worth noting the FSC’s move is a major deal – the first sign of approval for corporate crypto investment since 2017 and the ban that brought it down. Since then, retail investors have driven all trading activity on the South Korean market with nary a big player in sight.
- It’s estimated that capital flight will have cost the country around 76 trillion won ($52 billion) as people sought trading opportunities elsewhere.
- Compare that to the US, where institutional investors are responsible for over 80% of volume on Coinbase in the first half of 2024
- Analysts think this change could be a game-changer for South Korean won-denominated stablecoins & domestic spot Bitcoin ETFs
And the guidelines are being seen as a real sign of progress in South Korea’s ‘2026 Economic Growth Strategy, ‘ alongside other policy changes & legislation, such as stablecoins approvals & spot ETF approvals.
Industry Reactions and Next Steps
Industry insiders are giving the move a thumbs up – although they do think the 5% equity limit is too restrictive. The rest of the world – the US, Japan, Hong Kong, and the EU- aren’t exactly slapping limits on corporate crypto holdings, so it’s a bit puzzling to them. They worry this limit will actually stifle the growth of ‘Digital Asset Treasury’ companies, which are trying to find ways to use crypto to give their companies a real edge.
The FSC plans to finalize all the guidelines over the next 6-12 months, and this will coincide with the Digital Asset Basic Act, which should pass sometime next year. This will all get underway by the end of the year and start to shake up the South Korean crypto scene.
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