Min Byungdeok Proposes Virtual Asset ETF Bill: "Enhancing Global Competitiveness"

Amendment to the Capital Markets Act Proposed
Virtual Assets to Be Included as Underlying Assets and Trust Property for Financial Investment Products

On June 27, Min Byungdeok, a lawmaker from the Democratic Party of Korea, proposed a partial amendment to the “Financial Investment Services and Capital Markets Act” (Capital Markets Act) to institutionalize exchange-traded funds (ETFs) based on virtual assets such as Bitcoin.

The main framework of the amendment is to expand the scope of underlying assets for financial investment products and trust property to include digital assets. The amendment adds virtual assets, as designated and announced by the Financial Services Commission, to the range of underlying assets for financial investment products, currencies, general commodities, credit risks, and risks related to natural, environmental, and economic phenomena. In addition, it includes virtual assets in the scope of trust property, which was previously limited to money, securities, monetary claims, movables, and real estate.

This aims to enable digital assets to be used as underlying assets for financial products such as ETFs, while also providing a legal basis for trust companies to hold and manage digital assets. Furthermore, it allows trust companies to delegate the custody and management of virtual assets to virtual asset service providers, while clearly defining the requirements and procedures for such delegation to strengthen investor protection.

However, if a trust company delegates trust operations such as custody and management of virtual assets to a virtual asset service provider, the trust company is required to verify the expertise and financial soundness of the virtual asset service provider and to conduct periodic inspections and take necessary measures.

The amendment also establishes a legal basis for over-the-counter derivatives trading, thereby supporting the development of various financial products. Another key feature is that the opening of the derivatives market will enable risk management strategies utilizing digital assets.

If the amendment passes, domestic investors will be able to access regulated financial products that allow indirect investment in digital assets. This is expected to strengthen investor protection and enhance the transparency and credibility of the market.

Min Byungdeok predicted that, for asset management companies and securities firms, the opportunity to develop new products would increase the diversity and competitiveness of the domestic ETF market. He also expressed hope that the establishment of a digital asset derivatives market, which previously existed only overseas, would help prevent capital outflows and serve as a stepping stone toward making the domestic virtual asset market a global hub.

Min Byungdeok stated, “If digital assets are incorporated into regulated financial products, it will enhance the global competitiveness of the domestic financial industry,” adding, “We expect to provide investors with a safer and more transparent investment environment.”