South Korea’s Financial Supervisory Service (FSS) has verbally advised local asset management firms to refrain from increasing exposure to crypto-related companies—particularly Coinbase and MicroStrategy—in their domestic ETFs. This guidance is based on the 2017 administrative order known as the “Emergency Measures on Virtual Currencies,” which discourages public financial products from investing in digital asset-linked equities.
Several Korean-listed ETFs currently allocate more than 10% of their holdings to crypto-related firms. For example, Korea Investment Trust’s “ACE U.S. Bestseller Stocks ETF” holds about 14.6% in Coinbase shares, while other active ETFs have combined exposures of around 13% to both Coinbase and MicroStrategy.
Although the FSS’s directive is non-binding, its timing signals growing concern from regulators about increasing institutional involvement in crypto markets. Passive ETFs, which follow strict index rules, face practical limitations in excluding crypto-related stocks—making it difficult for managers to comply immediately.
Industry stakeholders have raised concerns about regulatory imbalance, pointing out that Korean investors are already gaining indirect exposure to these stocks through U.S.-listed ETFs. They argue that tightening rules on domestic products alone may have limited effectiveness and could disadvantage Korean issuers.
The FSS responded by emphasizing that although global regulatory frameworks for digital assets are evolving, Korea has not yet finalized legal definitions or supervisory guidelines. Until such standards are in place, regulators intend to maintain the current cautious approach.
In essence, the warning reflects the Korean authorities’ effort to carefully evaluate crypto-related investments within ETFs. With the legal infrastructure still catching up, both fund managers and retail investors are advised to closely monitor future policy developments.
