South Korea Establishes Virtual Asset Committee to Review Spot Crypto ETFs

The committee will act as an advisory body designed to provide comprehensive oversight and guidance for the crypto industry.

South Korea’s Financial Services Commission (FSC) has announced the creation of a Virtual Asset Committee to address the approval of spot crypto exchange-traded funds (ETFs) in the country, local media reports revealed on Oct. 10.

The committee will serve as an advisory body tasked with providing comprehensive oversight and guidance for the crypto industry in South Korea. It will be headed by the FSC Vice Chairman, Soyoung Kim, and will comprise representatives from related government departments and nine members from the private sector.

The Virtual Asset Committee will also handle other key issues in the South Korean digital asset sector, including the authorization of corporate accounts for digital assets.

Currently, Bitcoin (BTC) and other crypto ETFs are banned in South Korea under the Capital Markets Act. This prohibition also extends to corporate accounts for digital assets due to concerns related to anti-money laundering compliance.

Non-profit for user protectionIn addition to the new committee, the FSC has also established the Digital Asset User Protection Foundation, a non-profit organization designed to assist users in recovering assets from service providers that have ceased operations.

The FSC is also reviewing renewal applications for digital asset service providers, with some registrations set to expire in October 2024.

Speaking to the National Assembly, Chairman Kim Byung-hwan reiterated the agency’s commitment to developing a robust monitoring system as the law protecting virtual asset users takes effect.

The regulator also highlighted its focus on investigating vulnerabilities within the trading monitoring system and enforcing strict measures against unfair trading practices.

As part of its ongoing efforts to enhance the regulatory framework for crypto in the country, the FSC also plans to gradually implement the second phase of legislation, which includes further regulations on the business activities of crypto service providers.

Easing the ‘Kimchi premium’Commenting on the development, CryptoQuant CEO Ki Young Ju said that the approval of a spot Bitcoin ETF in South Korea will minimize the “Kimchi premium” by opening the market to arbitrage mutual funds and market makers.

The Kimchi premium is a term used to describe the phenomenon where crypto prices in South Korea are typically higher than the rest of the global markets. This is usually caused by a higher demand for crypto within the country compared to the rest of the world.

According to Chainalysis, the Kimchi premium can vary depending on market conditions and regulatory changes, making it a popular indicator among traders. When Bitcoin reached a new all-time high in March, the Kimchi premium also hit a new record.

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