The Financial Supervisory Service of South Korea (FSS) has urged asset management companies to reduce their investments in the stocks of cryptocurrency firms, particularly Coinbase and Strategy (formerly MicroStrategy). In early July 2025, the FSS issued a relevant directive, emphasizing the need to adhere to existing regulations regarding investment restrictions in crypto assets.
This is reported by Finway
Details of Recommendations and Current Regulations
The regulator stressed that institutional financial organizations in the country are prohibited from investing in cryptocurrencies and related derivative products according to rules established back in 2017. In light of this, companies were advised not to increase the share of cryptocurrency company stocks in their exchange-traded funds (ETFs), although the recommendation is non-binding.
“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 implemented,” stated a representative of the regulator.
Market Reaction and Prospects for Change
The FSS recommendations have raised concerns among ETF providers, as these restrictions do not apply to retail investors. Many ETFs in South Korea already have a significant share of American crypto firms in their portfolios. For instance, in the ACE US Equity Best Seller ETF, managed by Korea Investment Trust Management, Coinbase stocks account for 14.6% of the portfolio. Other popular funds 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 noted that implementing changes in already existing passive ETFs will be challenging. Therefore, the main goal of the latest recommendation is to urge companies to exercise caution when creating new products until the legislation in South Korea is updated. Investors expect that relevant reforms will occur soon, especially in light of the pro-crypto candidate Lee Jae-moon’s victory in the presidential elections.