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Digital asset deposits in South Korea's largest crypto custodian more than tripled during the second half of 2023 amid the crypto realm's excitement for spot Bitcoin ETFs. Marco Verch/flickr

KEY POINTS

  • The significant increase in deposits came as crypto markets anticipated the SEC's spot BTC ETFs decision
  • KODA also said its local market share in crypto custodial services reached 80% in H1 2023
  • The ruling party said it was considering possibly allowing investments on overseas-approved crypto products

Korea Digital Asset (KODA), South Korea's largest institutional crypto custodian, announced that its crypto assets in custody climbed nearly 248% during the second half of 2023 as the country considers the potential of local spot Bitcoin exchange-traded funds (ETFs).

In particular, KODA said the digital assets in its custody expanded to around 8 trillion Korean won (approximately $6 billion) during H2 2023 from around 2.3 trillion Korean won (approximately $1.7 billion) at the end of the first half.

The spike in crypto deposits at KODA came at around the same time investors hyped up crypto markets due to the U.S. Securities and Exchange Commission's (SEC) work on approving spot Bitcoin ETFs. Ahead of the approval, BTC's price rose around 38% as per The Block.

The American financial regulator approved 11 spot BTC ETFs last month, driving Bitcoin to trade in the green zone with an increase of more than 3% at the time. Bitcoin's lead shortly after the SEC's approval announcement triggered a ripple effect that resulted in a broader market-wide rally.

Back in South Korea, KODA said it currently manages more than 200 wallets and serves around 50 corporate customers. At the end of the H1 2023, the firm's local market share reached 80%, KODA said, citing a Korea Financial Intelligence Unit report.

KODA's positive announcement comes in the heels of South Korea's Financial Supervisory Service (FSS) revelation that its governor, Lee Bok-hyun, is expected to meet SEC chief Gary Gensler sometime in the second quarter of 2024.

Lee announced the anticipated meeting with Gensler earlier this month while discussing his 2024 business plan. He said "there are areas where we will focus on issues such as virtual asset issues and Bitcoin spot ETF."

Aside from a meeting with the SEC chair, Lee is also expected to visit major financial markets in the U.S. such as New York.

A day after the SEC's historic decision on spot Bitcoin ETFs, South Korea's Financial Services Commission (FSC) warned local securities firms from engaging in overseas-listed spot BTC ETFs, saying it "may violate the existing government stance on virtual assets and the Capital Markets Act."

The country prohibits corporations and institutions from directly investing in cryptocurrencies through exchanges. However, South Korean crypto custodians are offering a regulated window for crypto asset management for institutional investors.

Earlier this week, the South Korean ruling People Power Party said it was considering the possibility of allowing investing in crypto products approved by "developed countries" such as spot BTC ETFs, local News1 reported, as per a Google translation.

Cho Jin-seok, KODA's CEO, said if a local spot Bitcoin ETF is approved in the country, he believes the company will play a "key infrastructure role" in the institutionalization of digital assets.

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