What happened
South Korea's Financial Services Commission (FSC) has signaled a major policy shift, announcing plans to allow financial institutions to hold equity in cryptocurrency firms this year. This would end a nine-year ban that has prevented banks and securities companies from owning stakes in crypto-related businesses.
Why it matters for the market
The announcement was made by Kim Sung-jin, head of the FSC's virtual asset division, during a National Assembly meeting. He stated that the government is simultaneously working on stablecoin-related legislation as part of the second phase of the Digital Asset Basic Act, alongside facilitating institutional investor entry into the crypto market.
The FSC has committed to completing digital asset legislation within the year. If institutional participation is realized, the long-standing prohibition on financial companies holding equity in crypto firms could be lifted, allowing banks and securities firms to engage in virtual asset investments.
Kim also revealed that the FSC is studying the introduction of institutional brokerage and over-the-counter trading intermediary mechanisms for the virtual asset market, similar to those in the stock market. Additionally, the regulator is considering simplifying entry requirements for financial institutions into the virtual asset industry for functionally similar business areas, drawing on the European Union's approach.
What traders should watch
This potential regulatory easing could significantly boost institutional involvement in South Korea's crypto market, enhancing liquidity and market stability. However, the final implementation depends on the completion of the legislative process and the specific details of the new regulations.
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