South Korea Outlines Blueprint for Spot Crypto ETFs

A report commissioned by the Korea Exchange (KRX) has proposed key prerequisites for introducing domestic spot cryptocurrency exchange-traded funds (ETFs) in South Korea.

The report, titled 'Research on Introducing On-Exchange Cryptocurrency Products,' was submitted to the KRX by Representative Ahn Do-geol of the Democratic Party of Korea on July 15. The research analyzed cases from six countries: the United States, the United Kingdom, Germany, Canada, Australia, and Hong Kong.

The report proposes adding virtual assets as underlying assets for ETFs, which are currently limited to financial investment products, currencies, and general commodities under the Financial Investment Services and Capital Markets Act.

To address the 'Kimchi premium' phenomenon, where domestic prices of cryptocurrencies are higher than international prices, the report suggests allowing ETF managers to procure spot assets from overseas platforms. This would create an arbitrage structure that could help resolve the premium issue.