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Ultra-high-risk products offering leverage of up to 150 times on the Kospi are being traded on overseas virtual asset exchanges, but South Korea's financial regulators say they have little power to act.

Several overseas virtual asset exchanges have recently launched perpetual futures products based on KORU — a triple-leveraged Kospi exchange-traded fund listed on the New York Stock Exchange — allowing traders to bet on the direction of the Kospi with leverage of up to 150 times, according to Yonhap News Agency.

As volatility in the domestic stock market has grown, Korean financial assets — which are relatively easy to generate trading volume around — appear to have emerged as a new revenue source for overseas virtual asset exchanges.

Kim Jeong-ho, a researcher at Tiger Research, said the trend reflects efforts by exchanges to generate new income streams by drawing on their existing trader base and infrastructure as crypto trading volume structurally declines.

"Exchange revenue is fundamentally tied to trading volume, and virtual assets alone are no longer enough to make up for the shortfall," Kim said. "Perpetual futures are simple to list and more profitable relative to trading volume than spot products."

Shim Su-bin, a senior researcher at Kiwoom Securities, said the goal appears to be keeping users engaged. "Even if the virtual asset market contracts, if users can trade index- and share-tracking futures on the same platform, they have less reason to leave," she said.

The core concern is that investor protections are in effect nonexistent. Domestic derivatives and leveraged products are subject to deposit requirements, investor education and margin regulations, but futures products on overseas virtual asset exchanges fall entirely outside those safeguards. Forced liquidations can occur rapidly when prices move sharply, and investors who suffer losses have little recourse within the domestic regulatory system.

Financial authorities appear well aware of the risks. Financial Supervisory Service chief Lee Chan-jin warned at a meeting with virtual asset operators on Wednesday that "launching high-risk products and events that chase only short-term earnings is a path to losing user trust."

Yet regulators have stopped short of taking a clear stance on overseas leveraged products. Major foreign exchanges such as Binance and Bybit are not subject to direct domestic regulation. Even when smaller, unregistered operators are identified, authorities say their practical options are limited to requesting access blocks or referring cases for investigation.

"This is a new type of product, and no global regulatory standard has been established for it," one financial authority official said. "It is difficult to say at this point what direction regulation should take." Another official said the relevant department was reviewing the products, adding that the regulatory approach would depend on how the nature of the products is interpreted.

Experts said authorities could consider requiring major overseas exchanges to operate within South Korea's licensing framework, or opening legitimate domestic alternative channels.

"Just as Binance operates local licensed subsidiaries — Binance US in the United States and Binance Japan in Japan — Korea could require the same structure," Kim said. "That would allow the same investor protections that apply to domestic leveraged products to be imposed on foreign operators as well."

"Demand could also be absorbed through licensed domestic exchanges or derivatives brokers offering products with safer leverage limits and investor protections," he added. "That would be better than leaving it in a regulatory blind spot."


20ki@heraldcorp.com