South Korea lifted its ban on corporate crypto investment after almost a decade. Unlike the US, which went all in with crypto and ended up trading below mNAV (market net asset value), the East Asian country’s approach is much more conservative.
South Korea’s Financial Services Commission (FSC) brought the nine-year corporate crypto investment ban to an end as it updated its guidelines. The updated guidelines, scheduled to be released in January or February, will permit corporate cryptocurrency investments and professional investment of up to 5% of the equity capital in crypto.
This move is very different from the digital asset treasury companies we saw in the US last year. Many of those firms raised capital, went all-in on crypto, and ended up trading below mNAV once prices cooled because there was no real business underneath. Korea’s approach is far more conservative.
0xThree, consulting firm analyst, Lavneet Bansal
Bansal further stated that the FSC is allowing only a small portion of balance-sheet capital to be invested, while the company’s core business remains the main value driver. “That makes crypto a treasury option, not the business itself,” Bansal said.
The new initiative taken by South Korea is conservative, just as Bansal put it. Although the ban is lifted, there are, however, some restrictions that are kept in place for safety measures.
Apart from the 5% capital equity allocations, companies and investors will only be able to put their money in the top 20 crypto assets by market capitalization through South Korea’s five crypto exchanges, all of which are regulated.
South Korea has been very cautious about the inflow and outflow of funds. The Kimchi Premium, which exists in the country, is a feature that makes cryptocurrencies trade much higher on crypto exchanges in South Korea than around the world. With stringent regulations, it makes it harder for traders to buy cheap crypto abroad and sell it locally to arbitrage the difference.
