Recently, as 'Perpetual Futures' products based on stocks, virtual assets, and other underlying assets have been launched and traded on overseas virtual asset exchanges, financial authorities have urged investors to exercise caution. They emphasized that due to the high-leverage structure of up to 200 times, significant losses can occur, and furthermore, investor protection under domestic law is not available.
The Financial Services Commission announced on the 16th that Perpetual Futures traded on overseas virtual asset exchanges are ultra-high-risk products, and therefore domestic investors must pay special attention.
Unlike regular futures, Perpetual Futures are derivatives that can be traded without a fixed maturity date. Investors can bet on price increases or decreases without directly holding the underlying asset, and they can also utilize leverage. Currently traded Perpetual Futures are linked to 10 times up to a maximum of 200 times the price fluctuations of the underlying asset.
Financial authorities emphasized that Perpetual Futures differ significantly in nature from traditional derivatives. They have no maturity date, do not presuppose the delivery of money or other assets at a specific future point in time, and are traded 24 hours a day, 365 days a year, resulting in different contract terms and trading and settlement structures. Regulatory frameworks by supervisory authorities have not yet been established, and many countries restrict such services. Authorities explained that investors should not mistakenly assume these products are the same as or similar to financial investment products traded on the domestic securities market just because of the name 'futures.'
Authorities warned that excessive leverage can lead to the loss of the entire investment amount. Because they are linked up to 200 times the price fluctuations of the underlying asset, even a slight move in the opposite direction of an investor's position can result in substantial losses.
In particular, the higher the leverage multiplier, the faster and larger the losses grow, posing a risk of forced liquidation before investors have time to provide additional margin. The entire investment amount can be lost in an instant. For example, if an investor takes a 10x leverage long (bet on price increase) position in Bitcoin with 0.1 billion won of their own funds and 90 million won borrowed from the exchange, totaling 100 million won, they could earn a 50% profit (5 million won) when Bitcoin rises by 5%. Conversely, if Bitcoin falls by about 10%, the loss reaches the collateral amount (0.1 billion won), and the exchange forcibly liquidates the position. In this case, the principal becomes 0 won.
Financial authorities explained that for a product linked 150 times to the Korean stock index, even if the index moves only about 0.66% in the opposite direction during trading hours, the entire investment amount could be forcibly liquidated.
Investor protection mechanisms are also not applied to Perpetual Futures. Since domestic legal regulatory frameworks do not apply to overseas virtual asset operators, it is difficult to obtain legal resolution and relief if events such as operator bankruptcy or business suspension, unilateral trading halts, various computer and financial accidents, or disputes occur.
Financial authorities plan to closely monitor the launch status of products linked to the Korean stock market and their impact on the domestic market. They have decided to respond decisively, including reporting illegal domestic business activities by overseas virtual asset operators to law enforcement authorities if discovered.
The policy is to carefully consider the introduction of similar domestic products and regulatory frameworks by comprehensively taking into account factors such as market impact, investor protection, and global trends.
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