Korean financial regulators are facing increased pressure to approve cryptocurrency exchange-traded funds (ETFs) following the U.S. Securities and Exchange Commission’s (SEC) recent approval of spot Ethereum ETFs.
The SEC’s decision on May 24, 2024, which comes after their approval of Bitcoin ETFs earlier this year, is expected to influence Seoul’s regulatory stance on digital assets.
In the U.S., the introduction of Ethereum ETFs represents a significant step in integrating digital assets with traditional finance, providing investors with a new avenue to gain exposure to cryptocurrency without directly holding it.
However, in South Korea, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have remained cautious, adhering strictly to the Capital Markets Act, which requires ETFs to be linked to traditional assets like securities, international currencies, and commodities.
The FSC has been particularly stringent, ensuring that ETFs in Korea comply with existing financial regulations, which currently exclude digital assets.
This conservative approach has drawn criticism from various quarters.
Xangle, a leading digital currency data provider in Seoul, has described the ban on digital asset ETFs as outdated, urging a revision to reflect the evolving financial landscape.
Jung Eui-jung, head of the Korean Stockholders’ Alliance, highlighted the growing frustration among investors due to the regulatory lag. He stressed the risk of capital flight, as investors might seek opportunities in more crypto-friendly markets like the U.S. if Korean regulators do not modernize their approach.
“It is only a matter of time before the U.S. opens up to other less-traded cryptocurrencies,” Jung warned.
The pressure on Korean regulators is mounting as global financial markets increasingly embrace digital assets.
