A study found that amending the Financial Investment Services and Capital Markets Act, resolving the "kimchi premium," and opening a futures market must be addressed in advance to introduce domestic spot virtual asset exchange-traded funds (ETFs).
According to a report titled "Research service for introducing on-exchange virtual asset products" submitted to lawmaker Ahn Do-geol of the Democratic Party of Korea by Korea Exchange (KRX) on the 15th, a concrete roadmap and institutional safeguards were presented for introducing domestic spot virtual asset ETFs.
Korea Exchange commissioned the report to the Korea Capital Market Institute in September last year and received it in April this year. The Korea Capital Market Institute analyzed cases from six major countries that have introduced virtual asset ETFs, including the United States, the United Kingdom, Germany, Canada, Australia, and Hong Kong, and derived measures for domestic application.
Through the report, the Korea Capital Market Institute cited amendment of the Financial Investment Services and Capital Markets Act as the most urgent legislative task.
Under the current Financial Investment Services and Capital Markets Act, ETF underlying assets are limited to financial investment products, currency, and general commodities, so virtual assets are not included as legal underlying assets. Therefore, the analysis is that only by revising the law to specify virtual assets within the category of underlying assets will ETF launches be possible.
The government also plans to support institutional improvements. The Financial Services Commission said through the jointly released "2026 economic growth strategy" with relevant ministries the previous day that it would support amendment of the Financial Investment Services and Capital Markets Act to create conditions for launching spot virtual asset ETFs.
Resolving the domestic and overseas virtual asset price gap, the "kimchi premium," is also one of the key tasks. According to the Financial Investment Services and Capital Markets Act, ETF underlying asset prices must be calculated by reasonable and appropriate methods. If domestic prices are formed higher than overseas, it is difficult to meet this requirement.
To resolve the kimchi premium, the Korea Capital Market Institute proposed allowing asset managers to directly procure (contribute) spot virtual assets on overseas platforms. The view is that activating an arbitrage structure in which an authorized participant (AP) purchases spot relatively cheaply overseas and brings it into the country can ease the kimchi premium.
The need to introduce a futures market to hedge against price volatility risk was also raised. The diagnosis is that tools are essential to defend against rapid price change risks that APs are exposed to when buying and selling large amounts of virtual assets during ETF creation and redemption.
As for the introduction method, it recommended a phased approach: first allow Bitcoin ETFs, which have a large market size, to verify operational stability, and then expand the scope to altcoin ETFs.
An alternative was also presented to establish a dedicated trust license for virtual assets to store and manage virtual assets.
Existing commercial banks lack infrastructure to store virtual assets, and virtual asset service providers (VASPs) face limitations in meeting licensed trust requirements within the institutional system. Accordingly, the analysis is that a realistic alternative is a structure in which banks, as first-tier trustees, hold legal ownership, while actual storage and management are re-entrusted to specialized VASPs that have obtained the newly established license.
A plan was also mentioned to grant VASP status to securities firms so they can perform prime broker (PB) functions. The intent is to improve the system so that securities firms can trade spot and futures virtual assets to support ETF creation and redemption.
An official at Korea Exchange (KRX) said, "We conducted a research service to introduce on-exchange virtual asset products to introduce domestic spot virtual asset ETFs."
An official at the Korea Capital Market Institute explained, "In the case of coin spot ETFs, there are still many areas that need various institutional supports."