South Korea Proposes Amendment to Legalize Crypto-Based ETFs

🏛️ Regulatory Shift & Political Momentum

• FSC roadmap proposed
  On June 19, 2025, South Korea’s Financial Services Commission (FSC) filed an official roadmap to the Presidential Policy Planning Committee aiming to legalize spot crypto ETFs by late 2025. The plan outlines regulatory safeguards—covering custody, fee transparency, investor protections, and AML measures—alongside groundwork for KRW-backed stablecoins (theblock.co).
• Bipartisan political promise
  Ahead of the June 3, 2025 election, major presidential hopefuls—including Lee Jae‑myung (Democratic Party) and candidates from the People Power Party (PPP)—publicly pledged to legalize spot crypto ETFs. They also proposed measures to ease institutional investment rules and revamp banking policies (theblock.co, cointelegraph.com).

🎯 Key Highlights of the Proposal

1. Target timeline: Late 2025
   Spot crypto ETFs are expected to launch in the latter half of 2025, marking a sharp reversal from previous outright bans .
2. Robust regulatory framework
   The roadmap encompasses investor protections, transparent fee structures, smart contract custody protocols, and strict AML/market manipulation penalties (cryptovate.io).
3. Stablecoin legalisation
   KRW‑based stablecoins are included in the plan, aimed at reducing capital outflows and enhancing financial sovereignty (theblock.co).
4. Institutional & exchange reforms
   The PPP seeks to rescind restrictive “one-exchange, one-bank” rules, enable corporate and nonprofit participation, and establish a crypto oversight committee (ccn.com).

🔍 Why This Matters

Impact Area Implications
| Retail & Institutional Access  | Enables regulated exposure to crypto via ETFs, without needing direct asset holding.
| Market Safety  | Equipped with investor protections and AML controls to mitigate excessive risk.
| Global Alignment  | Aligns South Korea with global markets like the U.S., EU, Canada, Japan, and Hong Kong.
| Stablecoin Empowerment  | Local stablecoins could strengthen financial infrastructure and reduce foreign dependence.

⚠️ Challenges Ahead

• Legislative process
  These reforms are currently at the roadmap stage. Final legislative approval by the National Assembly is essential and may encounter delays (ccn.com, cryptovate.io, cointelegraph.com, reddit.com).
• Regulatory coordination
  Multiple agencies—including the Bank of Korea—must harmonize regulations on stablecoins and ETFs, requiring inter-agency consensus .
• Market readiness
  Exchanges and custodians must build compliant infrastructure, custody solutions, and full transparency in listing and fees.

✔️ Outlook

South Korea is making rapid and tangible progress toward approving spot crypto ETFs and stabilizing its digital asset framework. With late-2025 as the likely launch target, widespread availability of ETF-related products could coincide with stablecoin adoption and regulatory modernization in the next 12–18 months—potentially positioning Korea at the forefront of crypto innovation in Asia.