South Korea explores ‘crypto’ spot ETFs, security token sales

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South Korea’s top stock exchange is considering adding digital asset spot exchange-traded funds (ETFs) to its product suite to revive investor interest following a year of political instability.

Elsewhere, one of America’s largest asset managers, Morgan Stanley (NASDAQ: MS), is weighing adding digital assets to its online brokerage to capitalize on Donald Trump’s rise to power and the expected ‘crypto’ investment rush.

South Korea warms up to STOs, spot ETFs

In January this year, the U.S. Securities and Exchange Commission (SEC) approved the first batch of BTC spot ETFs, and since then, other nations have explored similar products. Some, like Thailand and Hong Kong, followed suit, launching their own ETFs.

South Korea could be the next to join its Asian peers. Jeong Eun-bo, the chairman of the Korea Exchange (KRX), revealed recently that the securities exchange is exploring new business avenues, such as ETFs, to revive the sector.

South Korea went through a rocky political year in 2024. President Yoon Suk Yeol imposed martial law in early December, which led to his impeachment (and his successor’s) by parliament within days. The country is now being headed by Finance Minister Choi Sang-mok as the acting president and acting prime minister.

These scandals, paired with global political and economic shakeups, have led to a steep decline in the trading activity at KRX. Eun-bo believes that the exchange must reinvent itself to bring investors back to Asia’s sixth-largest stock exchange.

“We will benchmark overseas cases for new businesses such as virtual currency ETFs and explore new areas in the capital market,” he said.

The move would be a departure from the country’s conservative stance. Despite the rise of digital asset ETFs in Asian and North American markets, Korea, Japan, and some other major economies have steered clear. Last year, experts at the Korea Institute of Finance warned against the ETFs, which they claimed posed a significant risk to investors and could undermine financial stability.

However, ETF approval would align with campaign pledges made by the opposition Democratic Party in the lead-up to this year’s elections, where it won by a landslide. Legislators from the party claimed they would request financial regulators reconsider ETFs, failure to which they would amend existing capital markets laws.

South Korea’s digital asset journey could go beyond ETFs. Speaking at the same event, Financial Services Commission (FSC) Chair Kim Byung-hwan revealed that the authority is considering approving security token offerings (STOs).

“We will institutionalize STO (tokenized securities) […] to diversify the securities issuance and distribution system…we will reorganize the entire system so that comprehensive financial investment businesses can be faithful to their original role of providing corporate finance and venture capital,” Kim told stakeholders.

Kim further implored the government, parliament, and corporate investors to work together to revive the market.

South Korea is still struggling with digital asset taxation. A new law that imposes a 20% tax on digital asset profits was meant to take effect in 2020, but a series of politically-motivated postponements have pushed it to 2027.

Despite the challenges, South Korea remains one of the world’s largest digital asset markets. Studies have found that over six million South Koreans trade digital assets, representing over 12% of the population.

Morgan Stanley explores ‘crypto’ on E*TRADE

In the U.S., Morgan Stanley, one of the country’s largest asset managers, is considering adding digital assets to its online brokerage platform, E*TRADE.

Morgan Stanley believes that once Donald Trump takes over as the new U.S. president later this month, digital asset investment will spike, reports The Information, which first broke the story. The Republican president-elect has pledged to implement a friendly framework that makes the U.S. the global ‘crypto’ capital.

E*TRADE is one of the leaders in online brokerage in the U.S., offering stocks, bonds, mutual funds, retirement accounts and more. Morgan Stanley acquired the platform in 2020 for $13 billion. At the time, E*TRADE boasted over five million accounts and over $360 billion in assets.

It’s not the first time E*TRADE explores digital assets. In 2018, the platform weighed digital currency products, but regulations were more restrictive. Discussions about Morgan Stanley’s acquisition also got in the way. Effectively, it missed out on a massive opportunity as others, like Robinhood (NASDAQ: HOOD), came in to offer digital currency services mixed with stock and bond trading.

E*TRADE currently offers some digital asset-related services, such as ETFs, futures and stocks related to ‘crypto’ firms. However, this would be the first time it allows its clients to directly purchase, sell and store digital assets, competing with established players such as Robinhood and Coinbase (NASDAQ: COIN).

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