[Digital Today reporter Oh Sang-yup (오상엽)] Financial authorities urged caution over ultra high-risk 'perpetual futures' products based on Korean stocks traded on offshore platforms such as overseas digital asset exchanges, saying investor protection is difficult.

The Financial Services Commission said on Thursday that overseas digital asset exchanges have recently launched products that allow leveraged investment of several dozen times or more using domestic stocks such as Samsung Electronics and SK Hynix as underlying assets. It urged investors to be cautious.

These products use the name 'futures' but have a different structure from typical futures traded within South Korea's regulated system.

Perpetual futures have no maturity and are not structured to deliver cash or the underlying asset at a specific future date. They trade 24 hours a day, year-round. The FSC explained that in many countries the relevant supervisory framework has not yet been established, or the services themselves are being restricted.

High leverage was cited as the biggest risk factor. Some perpetual futures currently traded are structured to track 10 to 200 times the price movement of the underlying asset.

For example, the FSC said that for a product that tracks Korean stock index moves at 150 times, an intraday move of just 0.66 percent against the investor's position could trigger forced liquidation of the entire investment.

Another problem is that domestic investor protection systems do not apply. Even if an offshore platform operator goes bankrupt or unilaterally halts operations or trading, it is difficult to apply relief procedures under South Korean law.

Even when IT or financial incidents or disputes occur, it is difficult for domestic financial authorities to respond directly. There are also limits to verifying whether customer deposited assets are properly safeguarded.

The FSC said it plans to continuously review the launch of offshore products linked to Korean stocks and their impact on the domestic stock market.

An FSC official said the commission will closely monitor the rollout of products linked to the Korean stock market by offshore platform operators and their impact on the domestic market. The official said it plans to respond firmly, including by filing complaints with investigative authorities, if illegal business activities in South Korea by offshore platform operators are found.

The FSC said it will review whether similar products should be introduced domestically and what regulatory framework should apply by comprehensively considering their impact on the market, the need for investor protection and overseas regulatory discussions.