The Financial Services Commission (FSC) has issued a warning to investors, stating that perpetual futures products based on South Korean stocks traded on offshore platforms such as foreign cryptocurrency exchanges are ultra-high-risk products that lack investor protection.

Controversy recently arose as offshore cryptocurrency exchanges launched products allowing investments in companies like Samsung Electronics and SK Hynix with leverage exceeding tens of times.

While perpetual futures share a similar name with "futures" products traded within South Korea's regulated market, their structures and contract terms differ.

This is because they have no expiration date, do not require the delivery of cash or other assets at a specific future date, and are traded 24 hours a day, 365 days a year.

The FSC emphasized, "Regulatory frameworks from supervisory authorities have not yet been established in many countries, and such services are restricted. Investors must not mistakenly believe that these are identical or similar financial investment products traded in the domestic securities market simply based on their name."

In particular, the perpetual futures currently being traded are linked to 10 to up to 200 times the price volatility of the underlying asset, featuring a structure that can rapidly generate massive investment losses.

The FSC explained that in the case of a structure linked 150 times to the South Korean stock index, even a mere 0.66% movement in the opposite direction during intraday trading could result in the total liquidation of the investment principal.

"Due to the excessively high leverage structure, large losses can occur even from routine, small price fluctuations in the underlying asset, and because domestic legal regulatory frameworks do not apply, investors cannot receive protection," the FSC said.

In particular, even if offshore platform operators face bankruptcy, suspension of business, unilateral suspension of trading, or various IT and financial incidents and disputes, it is difficult to legally resolve or apply relief procedures under domestic law.

It is also difficult for authorities to verify whether customer-deposited assets are properly protected and safeguarded.

The FSC stated, "We will closely monitor the status of offshore platform operators launching products linked to the South Korean stock market and their impact on the domestic market," adding, "If illegal business operations by offshore platform operators within South Korea are discovered, we plan to respond resolutely, including filing complaints with investigative agencies."

The potential future introduction of similar domestic products and their regulatory frameworks will be reviewed by comprehensively considering market impacts, investor protection, and international discussion trends.