South Korea Eyes Bitcoin ETFs Amid Japan's Regulatory Shift

South Korea is cautiously exploring the possibility of approving Bitcoin exchange-traded funds (ETFs), a move that reflects the evolving regulatory landscape in the cryptocurrency sector. The country's financial regulators are closely monitoring developments in Japan, where discussions about lifting the ban on crypto ETFs are underway. Japan's Financial Services Agency (FSA) is considering positioning cryptocurrencies as financial products alongside securities, a shift that could pave the way for the approval of crypto ETFs in Japan. This potential change has caught the attention of South Korean authorities, who are studying Japan's legislative trajectory and policy trends.

South Korea's Financial Supervisory Service (FSS) has been analyzing Japan's recent legislative developments concerning digital assets and sharing insights with relevant institutions in South Korea. The discussions in Japan are expected to continue through the first half of 2025 before a concrete legislative plan is proposed to the National Assembly in 2026. South Korea's cautious approach is evident in the comments made by Kim So-young, vice chairman of South Korea’s Financial Services Commission (FSC), who reiterated the country’s careful review of spot Bitcoin ETFs. Kim acknowledged the global trend toward these investment vehicles but emphasized the need for regulatory oversight to mitigate risks associated with cryptocurrency market volatility and potential financial crime.

The push for regulatory clarity in South Korea comes at a time of political turmoil, following the dramatic arrest of former President Yoon Suk Yeol on Jan. 15. Despite the political instability, South Korea’s financial regulators have maintained their focus on strengthening crypto oversight. On Feb. 13, the Financial Services Commission announced new guidelines permitting universities and charitable organizations to sell cryptocurrency donations starting in the second half of 2025. This move marks a significant step in integrating digital assets into broader financial and philanthropic ecosystems. Additionally, enforcement actions against crypto platforms have continued, with Upbit, South Korea’s largest cryptocurrency exchange, being served with a suspension notice for alleged violations of Know Your Customer (KYC) regulations. Upbit has since filed a lawsuit against South Korea’s Financial Intelligence Unit in an effort to overturn the sanctions, arguing that the regulatory action was overly restrictive.

South Korea is one of the world’s most active cryptocurrency markets, with a significant portion of its citizens investing in digital assets. The growing adoption of cryptocurrencies has fueled demand for regulated investment products like Bitcoin ETFs.