South Korea FSC chairman: ‘Difficult for crypto to replace legal tender’

• South Korea urged caution on spot Bitcoin ETFs, prioritizing financial stability and regulatory review.
• Kim Byung-hwan emphasizes investor protection over market development in cryptocurrency policies.

Kim Byung-hwan, the nominee for the chairmanship of the Financial Services Commission (FSC), expressed caution about allowing corporations to invest in cryptocurrencies.

Kim’s comments were made during a confirmation hearing at the National Assembly’s Political Affairs Committee on the 22nd of July.

Why is Kim cautious about BTC ETFs?

Kim Byung-hwan, who is set to succeed FSC Chairman Lee Bok-hyun later this summer, addressed this issue by responding to a Democratic Party lawmaker’s inquiry, where he said, 

“I am cautious about the issue of approving the launch of [crypto] accounts for corporations and institutions. Considering the confusion we have seen in the [crypto] market in the past, current policies should focus on investor protection [rather than market development].”

Despite lawmakers’ push for the FSC to approve spot Bitcoin [BTC] ETFs like in Washington, regulators advised a more prudent approach.

They recommended waiting to see the results of the U.S. actions before deciding, showing a careful stance on introducing spot BTC ETFs in South Korea.

He also stated that virtual assets should not be considered as currency or financial products and said, 

“It is difficult for virtual assets arbitrarily issued by the private sector to completely replace the role of legal tender issued by the central bank and it is difficult to view virtual assets as currency.”

How will this benefit South Korea?

Strangely, this news comes amid recent actions by South Korea’s financial security regulator, which introduced long-awaited measures on the 19th of July to protect users interacting with virtual asset service providers (VASPs). 

Notably, this move by South Korea’s financial authorities differs from the aggressive moves made by international regulators.

This is because they do not consider virtual assets suitable as underlying assets for ETFs, leading to a ban on new listings and brokerage services.

Thereby, they believe that the decisions about spot ETFs will prioritize financial market stability and the potential impact on financial institutions.

This highlights that officials are focusing more on regulation over market expansion, emphasizing user protection and maintaining market order.

Needless to say, they stress the need for further discussions on regulations, especially regarding the entry and operations of virtual asset providers.

That being said, Kim summed it all best when he said, 

“I think we need to prioritize user protection and maintaining market order, and first review regulations on entry and business practices of virtual asset operators.”