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🇰🇷 South Korea /Economy & Trade

Overseas Crypto Exchanges Offer 150x Leverage on Korean Market ETF, Sparking 'Gambling Site' Concerns

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Official statement Context piece
  • Overseas cryptocurrency exchanges are offering highly risky derivative products linked to a South Korean stock market ETF, allowing leverage up to 150 times the investment.
  • These products, based on the Direxion Daily MSCI South Korea Bull 3X Shares (KORU) ETF, have proliferated due to increased volatility in the South Korean stock market, particularly in semiconductor stocks.
  • South Korean financial authorities consider these exchanges to be unregistered and effectively illegal operations, likening them to 'gambling sites,' but lack regulatory power over them.

A surge of highly speculative derivative products, offering leverage up to 150 times an initial investment, are appearing on overseas cryptocurrency exchanges. These products are linked to the Direxion Daily MSCI South Korea Bull 3X Shares (KORU) ETF, which tracks the performance of the South Korean stock market with a 3x daily return multiplier. The proliferation of these ultra-high-risk instruments is attributed to the recent sharp fluctuations in the South Korean stock market, especially in semiconductor stocks like Samsung Electronics and SK Hynix.

Major cryptocurrency exchanges, including KuCoin, OKX, Bybit, Binance, Bitget, MEXC, XT, and Bitmart, have listed perpetual futures contracts for KORU. These contracts allow investors to bet on the price movements of KORU with significant leverage, without needing to hold the underlying asset. For instance, Binance initially offered 20x leverage on KORU futures and later introduced a 50x leverage option. When combined with KORU's 3x daily return, this creates a potential for up to 150x leverage on the Kospi index's daily movements.

These are essentially gambling sites opened overseas.

— Financial Services CommissionDescribing unregistered overseas cryptocurrency exchanges offering high-leverage products.

South Korean financial authorities have flagged many of these exchanges, such as KuCoin, MEXC, XT, and Bitmart, as unregistered and operating illegally within the country. The Financial Services Commission (FSC) has referred some of these exchanges to prosecutors for investigation, describing them as essentially 'gambling sites.' Despite the high risks and the regulatory concerns, there are reportedly trillions of won invested in these products, with some domestic investors participating significantly.

Domestic investors can easily access these overseas platforms by purchasing Tether (USDT), a dollar-based stablecoin, with Korean won on domestic exchanges like Upbit or Bithumb, and then transferring it to the overseas exchanges. While industry insiders acknowledge that futures can be used for hedging, they strongly caution that trading leveraged futures purely for quick profits constitutes gambling rather than investing. South Korean regulators state they lack the authority to intervene directly in these overseas operations, leaving a significant gap in oversight.

Trading leveraged futures with the aim of making a quick fortune is not investment, but gambling.

— Industry InsiderCommenting on the speculative nature of the leveraged derivative products.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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