South Korea’s stock exchange has pledged to launch crypto exchange-traded funds (ETFs) and derivatives to cement the market’s global standing, but the initiative faces a critical roadblock: a legislative impasse that has split the country's top financial regulators.
Seoul’s ETF Ambitions Stalled by Regulatory ‘Civil War’ Between FSC and Central Bank
5 January 2026 - 08:39 CET
By Sandmark staff
Chasing the ‘Korea Premium’
Korea Exchange (KRX) Chairman Jeong Eun-bo announced plans to gradually extend trading hours to a 24-hour system, aiming to shed the "Korea Discount" that has historically undervalued domestic stocks. Speaking at a New Year event on 2 Jan, Jeong noted that with the benchmark KOSPI index surpassing the 4,000 level, the market is ripe for "normalization" and a shift to a "premium" valuation.
Currently, KRX stocks trade at an average price-to-earnings (P/E) ratio of 14.3 to 15.8, significantly lagging the S&P 500 (26.5) and the MSCI World Index (24.3). Jeong argues that integrating digital asset products, including ETFs and futures, is essential for the "digital finance transition" required to close this gap.
The regulatory gridlock
However, the infrastructure for these products is being held hostage by a turf war between the Financial Services Commission (FSC) and the Bank of Korea (BOK).
The two bodies are clashing over the "Digital Asset Basic Act," specifically regarding stablecoin issuance and exchange governance. The BOK is pushing for a conservative model, restricting won-pegged stablecoin issuance to entities with at least 51% bank ownership to ensure financial stability.
The FSC counters that such strict rules would stifle innovation, effectively handing the market to legacy banks and freezing out fintech competitors. The regulator is also resisting the Central Bank’s demand for a new oversight body with veto power, arguing that existing frameworks are sufficient.
Presidential pressure
The deadlock comes despite a clear mandate from the top. President Lee Jae-myung, who took office in June 2025, campaigned on a pro-crypto platform that included legalizing spot ETFs and establishing a formal stablecoin market.
While the administration pushes for the second phase of the Digital Asset Act, the FSC is moving ahead with tighter controls on existing players. The commission has proposed capping shareholder ownership in the country’s "Big Four" exchanges (Upbit, Bithumb, Coinone, and Korbit) at 15-20%, a move that would force a massive corporate restructuring of the industry’s dominant platforms.
Until the BOK and FSC resolve their dispute over who controls the rails, the KRX’s vision of a 24-hour, crypto-integrated market remains a pipe dream.
