South Korean Regulators to Crack Down on Offshore Perpetual Futures; Illegal Sales May Bring Criminal Complaints

Tight Watch on Products Linked to South Korean Stocks and Indexes

Crackdown on Recruiting Domestic Investors Through Referral Codes

South Korea’s financial authorities will crack down on illegal domestic business by offshore perpetual futures platforms linked to South Korean stocks and stock indexes. If violations are found in the process of recruiting Korean investors or soliciting trades through referral codes or similar methods, authorities plan to respond with measures including criminal complaints to investigative agencies.

The Financial Services Commission and the Financial Supervisory Service announced that policy direction on Oct. 16 as they issued an investor alert on perpetual futures trading. The move follows an increase in trading of products linked to South Korea’s stock market on overseas crypto platforms.

Global crypto exchanges are increasingly offering perpetual futures tied to South Korean stocks and stock indexes. That broadens trading beyond cryptocurrencies into products that let investors bet on price moves in the domestic equity market. Authorities plan to closely examine whether those platforms violate South Korean law when they encourage Korean investors to sign up and trade.

The review will go beyond investor recruitment. Authorities will monitor how many products based on South Korean stocks and indexes are being launched and traded. They will also analyze the impact of such trading on the domestic stock market.

Perpetual futures are derivatives that allow investors to bet on price moves without a contract expiration date. Unlike standard futures, which settle assets or cash at a set future date, perpetual futures have no maturity and trade 24 hours a day, including weekends and holidays. Authorities stressed that investors should not assume products labeled “futures” have the same structure or investor protections as regulated products in South Korea.

Authorities also urged caution over high leverage. Many products on offshore platforms offer leverage of 10 times to 200 times. In a product offering 150 times leverage on a South Korean stock index, a move of about 0.66% against an investor’s position could trigger liquidation of the entire investment. The higher the leverage, the less time investors may have to post additional margin.

Recovering losses after an incident may also be difficult. South Korea’s domestic listed futures and options market requires retail investors to meet conditions such as minimum deposits, prior education and simulated trading. Most offshore crypto platforms, by contrast, are not supervised under South Korean financial law. If a platform goes bankrupt, suspends operations or halts trading unilaterally, resolving disputes through domestic systems would be difficult. There are also limits to verifying how customer assets are being held.

Financial authorities said these types of perpetual futures are not institutionally permitted in South Korea. Any decision on whether to allow them in the future, and how to regulate them, will be made after reviewing investor protection, spillover effects on the domestic market and overseas discussions.