Brokerages see Bitcoin ETFs and digital securities as key growth drivers

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Securities firms in Korea are closely monitoring the potential of security token offerings (STOs) and spot Bitcoin exchange-traded funds (ETFs), anticipating that the virtual asset market will grow with the launch of the second Donald Trump administration later this month.

Security tokens are a means of dividing physical or financial assets, such as real estate, and linking them to blockchain-based tokens for trading. An STO is a method of fundraising that utilizes this system.

The CEOs of major securities firms and heads of related institutions have mentioned in their New Year addresses that they view virtual assets as a future growth engine despite ongoing concerns. They vowed to expand initiatives related to virtual assets as part of their 2025 business goals.

Hana Securities CEO Kang Seong-muk announced plans to prioritize STOs and digital assets, highlighting the company’s alignment with evolving market trends. Meanwhile, Korea Investment & Securities CEO Kim Sung-hwan emphasized the importance of exploring new opportunities in emerging areas such as artificial intelligence and virtual assets.

Korea Financial Investment Association Chairman Seo Yoo-seok also pledged to support the industry by addressing member firms’ demands, stating his commitment to helping the sector discover new growth opportunities in the virtual asset market, including efforts to legislate STOs and launch virtual asset ETFs this year.

Industry officials see significant market potential in virtual assets.

According to the Hana Institute of Finance, the domestic STO market is projected to triple in size, growing from approximately 119 trillion won ($82 billion) in 2026 to 367 trillion won by 2030.

In line with these projections, major securities firms have been preparing to enter the STO market through consortiums and other initiatives.

In terms of spot Bitcoin ETFs, the industry anticipates substantial growth with Trump's return to the White House. While the virtual asset market has already surpassed $3 trillion, many speculate that the potential effects of Trump's policies have yet to be fully reflected.

“The current virtual asset market is overly fixated on prices, failing to envision the transformation that will occur once the digital asset industry establishes itself as a formal sector and attracts talent, funding, financial institutions and big tech players,” NH Investment & Securities analyst Hong Seong-wook said.

“The growth potential of the digital asset industry under the Trump administration is undeniable. With the anticipated regulatory easing, the industry is expected to enter a full-fledged period of expansion in the second half of this year.”

Kim So-young, second from right, vice chairman of the Financial Services Commission, speaks during the first meeting of the virtual asset committee at the Government Complex Seoul, Nov. 6, 2024. Korea Time file

However, the prospects for trading security tokens and spot Bitcoin ETFs remain uncertain.

Both the ruling and opposition parties have proposed bills to establish a legal framework for STOs. Yet, progress on legislation has stalled as political attention has shifted to impeachment proceedings following President Yoon Suk Yeol’s botched martial law imposition on Dec. 3.

Trading of spot Bitcoin ETFs is currently blocked due to the authorities' regulatory interpretations.

Last year, despite the U.S. Securities and Exchange Commission approving spot Bitcoin ETFs, the Financial Services Commission (FSC), Korea's top financial regulator, ruled that such ETFs do not qualify as financial investment products under existing laws. As a result, intermediary trading was prohibited.

Under current regulations, ETFs are required to track an underlying index composed of eligible underlying assets. However, virtual assets do not meet the criteria for underlying assets, making them ineligible for ETF inclusion, according to the authorities.

They noted that the virtual asset committee under the FSC will continue relevant discussions.

During its inaugural meeting held in November, the committee discussed measures to allow corporations to invest in virtual assets. The committee plans to discuss the potential issuance of spot virtual asset ETFs in the future. The committee’s second meeting is slated for Jan. 15.