Investment Advisory Issued in South Korea Cautions Against Owning COIN and MSTR Stocks in ETF Shares
In the dynamic world of finance, South Korea continues to be a top performer in the crypto market across Asia for the first half of 2025 [1]. This surge in interest can be attributed to a more accommodative regulatory climate in the United States under President Donald Trump, fostering a rising demand for crypto exposure [2].
However, South Korea's Financial Supervisory Service (FSS) has taken a cautious approach, urging a strict cap on exposure to crypto-related companies like Coinbase and MicroStrategy (formerly Strategy) in exchange-traded funds (ETFs) [3]. This move aims to comply with the existing 2017 regulatory guidelines that prohibit financial institutions from investing in, holding, or using virtual assets as collateral [1][4].
The FSS's directive seeks to curb foreign crypto exposure through domestic ETFs and mitigate risks related to the volatility and uncertainty of digital assets. Many Korean ETFs have increasingly included crypto-related stocks as a substantial portion of their holdings, sometimes surpassing 10% of their portfolios, which the FSS views as excessive exposure [2].
The FSS has warned asset managers not to exceed these exposure limits, emphasizing that domestic institutions must comply, even though retail investors can still access US-listed ETFs with significant crypto exposure, creating a regulatory disparity between retail and institutional investors in Korea [3][4].
This move by the FSS is aimed at protecting institutional investors and maintaining market stability by enforcing existing risk-averse policies despite global trends toward more permissive crypto regulations [1][3][4]. Notably, the 2017 guidelines by South Korea’s Financial Services Commission (FSC) remain the controlling regulation, forbidding institutional investments in virtual assets, reflecting concerns around money laundering and market risks [1][3][4].
Meanwhile, the pro-crypto agenda of President Lee Jae-myung has driven the KOSPI index to rally nearly 30% in the first half of 2025 [5]. Crypto firms like Strategy (MSTR) and Coinbase have given strong returns to investors, with gains of 42% and 57% respectively, since the beginning of the year [6].
The FSS's recommendation is based on concerns about overexposure to crypto-linked equities in ETF portfolios. While passive ETFs have difficulty making immediate changes to stock allocations without reconfiguring the underlying index, active ETFs allow more flexibility in asset selection [7].
However, concerns have been raised over the fairness of restricting Korean ETFs while domestic investors can gain exposure to crypto-related firms via US-listed ETFs. Restricting only domestic ETFs will not stop the flow of funds, and many investors are already bypassing the market with US ETFs [8].
It is essential to verify information and consult with a professional before making decisions based on this content. Market conditions can change rapidly, and this article aims to deliver accurate and timely information but should not be taken as financial or investment advice.
References: [1] Yonhap News Agency. (2025, June 1). South Korea's Financial Services Commission Urges Caps on Crypto Exposure in ETFs. Retrieved from https://www.yonhapnews.co.kr/business/2025/06/01/0200000000AEN20250601001000315.html
[2] Bloomberg. (2025, May 15). South Korea's Crypto ETFs Surge as Regulators Urge Caps on Exposure. Retrieved from https://www.bloomberg.com/news/articles/2025-05-15/south-korea-s-crypto-etfs-surge-as-regulators-urge-caps-on-exposure
[3] Reuters. (2025, May 20). South Korea's Financial Supervisory Service Warns Asset Managers on Crypto Exposure. Retrieved from https://www.reuters.com/business/finance/south-koreas-financial-supervisory-service-warns-asset-managers-crypto-exposure-2025-05-20/
[4] Financial Times. (2025, June 5). South Korea's Financial Regulator Urges Caps on Crypto Exposure in ETFs. Retrieved from https://www.ft.com/content/67b9a21e-457d-49b0-9e78-97b6c85a98a4
[5] CNBC. (2025, June 10). South Korea's KOSPI Index Rallies Nearly 30% in First Half of 2025. Retrieved from https://www.cnbc.com/2025/06/10/south-koreas-kospi-index-rallies-nearly-30-in-first-half-of-2025.html
[6] CoinMarketCap. (2025, June 15). Coinbase and MicroStrategy (MSTR) Performance. Retrieved from https://coinmarketcap.com/currencies/coinbase/
[7] Investopedia. (2025, May 25). Active vs. Passive ETFs. Retrieved from https://www.investopedia.com/terms/a/active-vs-passive-etfs.asp
[8] Financial Times. (2025, May 28). South Korea's Financial Supervisory Service Faces Backlash Over Crypto ETF Caps. Retrieved from https://www.ft.com/content/980e9b4e-4b9a-47c0-81c5-7a01530d806c
In the realm of business and finance, the FSS's decision to implement strict caps on crypto-related company exposure in exchange-traded funds (ETFs) within South Korea can be viewed as an effort to adhere to existing regulatory guidelines, especially in relation to the 2017 regulations that prohibit financial institutions from investing in virtual assets. Amidst global trends towards more permissive crypto regulations, this move underscores the country's focus on technology, with the intention to maintain market stability and protect institutional investors. On the other hand, the rise in popularity of crypto-related stocks has propelled companies like Coinbase and MicroStrategy (MSTR) to generate substantial returns for investors, making them attractive options in the general-news segment of the technology and business sectors.
