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Will South Korea Approve Spot Cryptocurrency ETFs Too?
The United States and Hong Kong have approved spot ETFs for Bitcoin and Ethereum, while the United Kingdom has approved a spot ETF for Bitcoin. (Image courtesy of Reuters)
Several countries, starting with the United States, have approved cryptocurrency spot exchange-traded funds (ETFs), and South Korean authorities are also in discussions about them. While the approval of such ETFs could have a significant impact on the growth of the sector, there is considerable opposition due to concerns that the incorporation of highly volatile cryptocurrencies into the traditional financial system could undermine market stability.
According to the cryptocurrency industry on July 17, countries that have approved cryptocurrency spot ETFs include the United States, Hong Kong, and the United Kingdom. The United States and Hong Kong have approved spot ETFs for Bitcoin and Ethereum, while the United Kingdom has approved a spot ETF for Bitcoin.
ETFs, listed on exchanges and traded like stocks, offer ease of investing and are particularly accessible to institutional investors. They also bring the benefit of regulatory protections for investors. The approval of cryptocurrency spot ETFs has been seen as a significant catalyst for growth in the sector due to these factors.
In South Korea, there is a climate of support for the approval of spot cryptocurrency ETFs within the political sphere, including from the main opposition party, the Democratic Party of Korea.
However, there is negative sentiment within financial authorities. The main regulatory agency, the Financial Services Commission (FSC), expressed concerns following the approval of Bitcoin spot ETFs by the U.S. Securities and Exchange Commission (SEC), stating that the introduction of such ETFs nationwide could potentially violate current government policies and capital market laws. The FSC added: “We are closely examining this matter due to its direct implications for financial market stability, the soundness of financial institutions, and investor protection.”
In academia, some argue that it may be premature to incorporate cryptocurrencies into the regulatory framework. Researcher Lee Bo-mi of the Korea Institute of Finance noted in a report last month: “If the issuance and trading of cryptocurrency-based ETFs were allowed, a significant portion of capital in South Korea could shift to cryptocurrency investments from sectors that generate future cash flows such as corporate investment, potentially leading to inefficient allocation of resources. There is a need for in-depth research and understanding of the benefits and drawbacks of introducing cryptocurrency-related products. At this point, the risks are believed to outweigh the benefits.”