[Editorial] Korea Self-Designating as 'Crypto Galapagos'

Financial Authorities Approach with One-Sided Regulation

Could Block New Opportunities and Innovation

On January 12th last year, chaos erupted in Korea shortly after a Bitcoin Spot ETF was listed in the United States. This was due to a report by the Korea Economic Daily revealing that the financial authorities had suddenly decided to prohibit domestic investors from investing in Bitcoin Spot ETFs. Criticism poured in that the government was unprepared for the rapid changes in advanced capital markets.

What has changed in Korea a year later? Still, not only is the listing of a Bitcoin Spot ETF impossible, but so is investing in one. It was only last year that the cryptocurrency department, which had been a temporary organization within the Financial Services Commission for six years, was upgraded to a regular organization. Although a Virtual Asset Committee involving experts has been formed, it is more focused on preparing cryptocurrency market regulations. The previous day, the Virtual Asset Committee announced that it was considering a regulation requiring cryptocurrencies to make regular disclosures, like business reports, similar to stocks.

Meanwhile, in the United States, the presence of Bitcoin has grown to the extent that pension funds include Bitcoin Spot ETFs in their portfolios. Among the 700 ETFs listed on the U.S. stock market last year, the one that attracted the most investment was undoubtedly the Bitcoin Spot ETF. The total asset size of the 12 Bitcoin Spot ETFs alone surpassed 160 trillion won, exceeding the market capitalization of SK hynix (152 trillion won). It's not just the Bitcoin Spot ETF. Derivatives based on Bitcoin Spot ETFs have also emerged. The movements of advanced capital markets and global financial firms not missing the opportunity with this unprecedented 21st-century investment asset are astonishing.

Wherever capital gathers, there is always an abundance of technological innovation and ideas. Of the 1,407 unicorn companies worldwide, 237 (17%) are blockchain and cryptocurrency-related startups. This means that one in five global unicorns is seeking opportunities in the blockchain and cryptocurrency market.

The fields are diverse. Fireblocks, valued at $8 billion, provides custody services to securely manage digital assets like cryptocurrencies. Israel's StarkWare is developing solutions that use advanced cryptographic technology to make blockchain transactions faster and cheaper. In Korea, only cryptocurrency exchange operators like Dunamu and Bithumb are included. It is pointed out that domestic companies are unable to find opportunities to challenge in the blockchain ecosystem because the government is focused on regulating cryptocurrency trading.

With the inauguration of the Donald Trump administration, the cryptocurrency and digital asset market is expected to expand even faster. There is an urgent need to shift policy direction towards enhancing market competitiveness. There is a pressing sense of crisis that self-designating as 'Crypto Galapagos' could result in losing both technological innovation and investment opportunities.

Jomi Hyun, Reporter mwise@hankyung.com